​Economic Impact on GDP of Investments in Public Transportation at the Tel Aviv Metropolitan Area

A new study conducted at the Aaron Institute for Economic Policy was introduced at a roundtable discussion held on November 10, 2019, concerning the economic impact on GDP of investments in public transportation at the Tel Aviv metropolitan area. The study, authored by Sani Ziv and Oren Shapir under supervision of Prof. Zvika Eckstein and Dr. Avihai Lifschitz, is the first to quantify the GDP impact of having a mass-transportation system in metropolitan Tel Aviv, considering various possible scenarios of demographics and employment.
The researchers found that the light rail system under construction in Tel Aviv and neighboring cities will have major economic benefits, not only due to shortening travel times or environmental issues, but also thanks to the economic contribution of the economic interaction between individuals and businesses in the metropolitan area. The increase in GDP is predicted to be between 1% and 4.5% of the projected GDP for 2040 and beyond – meaning around 27-110 billion NIS per year in today's value – according to the scenarios of demographics and employment presented. This increase in GDP is associated with the advantages of agglomeration. Economic literature asserts that the activity of firms and employees is more effective and productive in high-density urban environments served by highly accessible transportation networks, due to the positive external effects of clustering, which creates physical proximity between businesses and individuals. Other participants in the roundtable discussion included Mr. Rony Hizkiyahu, Accountant General in the Ministry of Finance; Dr. Adi Brander, Head of Macroeconomic Policy Division in the Bank of Israel's Research Department; Mr. Tamir Cohen, Infrastructure 2030 Program Coordinator in the Ministry of Finance's Budget Department; Dr. Nir Sharav, Team Director of the Public Transport Strategic Plan Project; and Mr. Nir Brill, Deputy Head of the National Economic Council. All participants concurred that the great benefits shown in Ziv and Shapir's study, as well as previous studies, justify the construction of the metropolitan light rail system.

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