Integrating a computable general equilibrium model with the four-step framework

Abstract

AbstractIn the transport policy development process, four-step models are commonly used to estimate transport costs and flows based on representations of travel demands and networks. However, these models typically do not account for broader changes in the economy, which may significantly shift travel patterns in the case of larger transport projects. LUTI models are often applied to simulate changes in land-use patterns, and regional production function models have been used to estimate changes in production, but these methods rely on fixed economic parameters that may not capture the structural economic changes induced by large transport projects. In a separate line of development, computable general equilibrium (CGE) models, which simulate entire economies, have been increasingly applied to estimate the magnitude and distribution of economic impacts from transport improvements both spatially and through markets, including GDP and welfare. Some CGE models are linked with transport network models, but none incorporate detailed networks or generate a complete set of travel demands. This paper presents an integrated CGE and transport model that generates household and freight trips and simulates a detailed road network for different time periods, such that the transport submodel can be calibrated and run as a conventional transport model. The model provides a tool for the rapid strategic assessment of transport projects and policies when economic responses cannot be assumed to remain static. In the model, the CGE submodel simulates the behaviour of households and firms interacting in markets, where their behaviour takes trip costs into account. The model then generates trips as a derived demand from agent activities and assigns them to the road network according to user equilibrium, before feeding back trip costs to the CGE submodel. The model is then tested by simulating the WestConnex motorway project under construction in Sydney, with results showing significant increases in welfare for regions close to the improvements. Further development of the model is required to incorporate land-use and mode choice.