Meta-analysis of rate of return on road projects

Abstract

This study analyzes the impact of economic and spatial factors on the economic return on Korean road projects, using meta-regression models and Monte Carlo simulation. This paper finds that the internal rate of return (IRR) is negatively affected by the distance and land acquisition cost (LAC) in urban areas while it is positively related to the population density, ratio of manufacturing workforce to total workforce, and LAC in rural areas. In addition, net benefits can be generated if a road length is less than 5 km. Finally, the IRR tends to be highly sensitive to the population density.

Keywords:

• Meta-analysis
• cost-benefit analysis
• risk analysis
• road project

Notes

1. The three major metrics for CBA are net present value (NPV), benefit–cost ratio (BCR), and IRR. The NPV reflects the net benefits of a project in monetary value as an absolute index and depends on the project size. The IRR and BCR measure the economic return as a normalized index, with the IRR in particular providing an explicit standard for the ranking of investment projects.

2. http://pimac.kdi.re.kr/study/new_list.jsp

3. The ratio of accidents on a curved road section compared to a beeline Section is 1.6:1 (KDI 2004).

4. The population density of a region with the road project is calculated on the basis of municipal-level cities and counties.

5. There is neither explicit nor official guideline regarding how to select subcontracted projects, so it is worthwhile to examine the latent selection behavior or rule of the KDI in the meta-analysis.

6. The road project between regions is defined as the planned road project across provinces and provincial-level cities.

7. This approach has two limitations: publication bias and selection of estimators (Stanley 2001; Florax 2001, 2002). The publication bias occurs because of the tendency of journal editors and researchers to report robust results. To control this bias, dummy variables can be applied to characteristics of publication. The selection bias is caused by choosing only single estimators among multiple ones for the meta-analysis. Selecting one estimator decreases the sample size but it can avoid a within-study dependence problem (Melo et al. 2009).

8. This factor has been included as one of the benefits Since 2002.

9. Major highway projects have been developed for transporting and exporting manufacturing commodities from primary industrial complexes to seaports Since 1972, so the construction of the highway network has a positive effect on the national economy through promotion of the growth potential of the manufacturing sector.