• Yoshitsugu KanemotoGRIPS

The Department for Transport in the United Kingdom has been a pioneer in including indirect benefits in the cost–benefit analysis of a transport project.  They identify three types of wider impacts, i.e., (1) agglomeration, (2) increased or decreased output in imperfectly competitive markets, and (3) labor market impacts, and provide detailed guidelines on how to estimate them.  Extending a differentiated product model that provides the microfoundations of urban agglomeration economies to include all three types of the wider impacts, this paper examines whether the British methodology of estimating the wider benefits can be justified theoretically.