Providing an Accurate Performance Measure of the Economic Contribution of the Freight Industry: An Input-Output Analysis

Introduction

Freight transportation services enable various economic activities by connecting people, businesses, goods, and resources (Wood & Wang, 2018). Appropriate techniques and policies to manage freight transportation services will benefit the community (Wu & Haasis, 2013). Fluctuations in the economy are closely associated with changes in freight industry trends since the volume of freight movement is often a reliable barometer of short-term variations in the level of trade among regions and nations (U.S. DOT, 2010). Thus, ensuring the seamless movement of freight is critical for the continuing economic growth of a region. Economists frequently studied and monitored the economic impacts in order to track the effectiveness of the past investment in transportation infrastructure (National Economic Council and the President’s Council of Economic Advisers, 2014), deal with the aftermath of natural disasters (Ivanov & Moore, 2008; Mesa-Arango, 2013), ensure the compliance with rules and regulations, and explore the feasibility of proposed alternatives (Wang et al., 2013). Most studies in freight transportation planning seemed to focus on evaluating the impacts of public investment on the reliability of the freight transportation system (BMW Group, 2007; EDRG & Cambridge Systematics, 2012; Mallett, Jones, Sedor, & Short, 2006; National Cooperative Freight Research Program, 2011). Widely used performance measures in these studies include speeds, travel time reliability, vehicle emissions and crashes involving trucks.

On January 11-12, 2011, a Peer-To-Peer Exchange on Freight Performance Measures, sponsored by the Federal Highway Administration, was convened in Baltimore. “The main objective of the meeting was to identify and discuss issues and needs surrounding performance management systems for freight at the Maryland Department of Transportation (Federal Highway Administration, 2011).” Whereas the Peer Exchange “identified commonly-tracked performance measures” such as travel speeds and delay reduction, questions were raised as to what the freight-specific economic performance measures should be and how they would be measured. The questions came from the notion that traditional measures are hardly freight-specific. Moreover, the general public does not recognize the benefits because of their often-negative perceptions of freight transportation. The authors suggested at the Peer Exchange the development of performance measures that are tangible and visible to the general public, ones that measure the economic impacts of the freight industry in terms of jobs and income rather than the impacts of government actions on the freight industry’s competitiveness/productivity. The general public is more interested in jobs and income rather than reliable and efficient freight movement. Highlighting jobs and income as effects of improved freight movement is critical information for public outreach promoting the importance of freight movement, which people used to take for granted. Past studies’ definition of the freight industry—e.g., a 2016 study by Federal Highway Administration (Federal Highway Administration, 2016)—was defined too broadly, including non-transportation specific sectors such as manufacturing, wholesale, and retail. Freight movement costs are already accounted for by such sectors’ business models, and they are a small fraction of the total business revenue and costs. Such a broad definition of the freight industry resulted in a largely inflated estimate of the industry’s economic impact. To the best of the authors’ knowledge, no study has clearly measured the contributions of the freight industry, built on a clear and stringent definition of the industry, to the economy of a sub-national level.

This paper provides an objective assessment of the economic contribution of the freight industry to Maryland’s economy. The economic contribution was measured as jobs, income, and gross domestic product (GDP) generated directly, indirectly and induced by the freight industry. The freight industry was defined as industry sectors whose primary purposes are to provide freight transportation services and/or support services.