Today, because of economic activity restructuring by function rather than sector, there is a need to reconsider the relationship between transportation and economic development. Most current analyses are static and do not consider capital stock in place, level and quality of service, and demand for transportation. Transportation services can be viewed as intermediate goods in the private production and consumption processes of firms and individuals. As is the case with other intermediate goods, different industries will demand different types, levels, and qualities. When adequate services are not available in a timely manner, bottlenecks arise. Bottlenecks are not limited to congestion on urban highways during peak hours; therefore, policy responses to them are not limited to simply building more highways. From this perspective, the transportation system can either aid or hinder public and private firms' production functions either directly or by complementing private inputs. Transportation networks also contribute to the attractveness of a region. An analysis of linkages between transportation and economic development under such circumstances would begin by identifying the role and potential of various sectors and functions in the economy. Next, the importance of transportation services for the most important sectors and functions in the economy would have to be identified. This method would requirea highly disaggregated analysis of the role of transportation services in the location of relevant industries and services that are nowdifferentiated by function rather than by sector. Such an analysis can help identify situations where the lack of specific transportation services becomes a bottleneck to economic development. However, this analysis is a necessary first step toward a cost-effective policy for economic development, but is not sufficient for formulating orevaluating a transportation policy's contribution to economic development. To make this additional step, analyzing the attributes of both transportation services and prospective users is necessary. This paper appears in transportation research record no. 1274, Transportation and economic development 1990: proceedings of a conference, williamsburg, virginia, november 5-8, 1989.
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