Economic Effects of Investment in a Metro System On Productivity and GDP

The state of transportation infrastructures in Israel lags significantly behind that of most developed countries. An OECD report found that the roads in Israel are the most congested among developed countries, while only a quarter of Israelis use public transport (compared to 60% globally), and in 20 years the daily duration of commuting is projected to increase by 60 minutes for the average commuter (OECD, 2018). According to estimates, the setback in public infrastructure per capita in Israel, particularly transportation infrastructure, accounts for around 24% of the productivity gaps between Israel and the group of countries it was compared to (Eckstein and Lifschitz, 2017).

Over the last decade, the Israeli government has invested in the road infrastructure in Israel, to accommodate the increase in the number of vehicles. However, despite this substantial investment, travel time by both private and public modes of transportation has not been reduced. The Israeli economy suffers from inefficient public transport consisting of low capacity busses, and the accessibility of public transport decreases as you get farther away from city centers (Sofer and Suhoy, 2019).