Tuesday, September 2, 2014

The distortions from urban vehicle ownership

Two comparative graphics of land-use in downtown Hartford, Connecticut, in 1960 and 2000 illustrate the pernicious effects of motor vehicle ownership and usage. As can be seen, the earmarked parking spaces (in red) have increased dramatically in the 40 years. It rose from 15000 parking slots, covering 7.5% of the land downtown, to 46000 slots, covering 22% of the land.
The explosive growth in vehicle ownership and the very high proportion of private vehicle work commutes over the last 3-4 decades have, in no small measure, been driven by a similar growth of parking facilities. Trends like paid parking have only served to marginally attenuate the growth of vehicle ownership. In this regard, Hartford is pretty much representative of the shifts in land-use across cities of the world.

This has also had distributive consequences. Given the limited and highly valuable land available, the expansion of parking space has come at the cost of other competing claims on land. Even as those who can afford it have benefited, the growth of parking spaces have reduced the space available for affordable housing, community amenities, and even public recreation centers, all of which adversely affect those less well-off. Several of the road-margin parking spaces have come at the cost of decreased road carriageways. Also, road margin parking and parking garages generates less tax revenues for the city than other developments.

A major source of increase in parking spaces have been the minimum parking requirements for both commercial and residential developments. Apart from favoring vehicle owners, such requirements also drive up property prices and rental values thereby crowding out the poor. Further, the high parking charges in such down-town areas have already made private vehicle use affordable only for the non-poor. This, as I blogged earlier, also exacerbates the skewed physical access to employment, for the rich and poor.   

Sunday, August 31, 2014

Best mass transit system in the world?

Vox points to a regional system in Germany, Verkehrsverbund Rhein-Ruhr,
The real hub of the Germany economy is a lesser-known but more interesting urban phenomenon — the polycentric metropolitan area known as Rhine-Ruhr, stretching from Dusseldorf and Cologne in the north to Bonn in the south. None of the constituent cities of Rhine-Ruhr are especially large, but together they make a metropolitan area that's 11 million strong and hosts 26 of Germany's 50 largest companies. Knitting it all together and making it all work is the complicated but efficient Verkehrsverbund Rhein-Ruhr, the region's mass transit system. It's composed of 29 regional rail lines, 11 S-Bahn lines, 19 light rail lines, 45 streetcars, and over 900 bus routes.
Far too often we look at mass transit only in terms of its mobility improvement dimension. The more important dimension though may be its role as an instrument of shaping urban growth. As with, Rhein-Ruhr, efficient mass transit has been the critical contributor to the success of economically and socially vibrant metropolitan areas like Tokyo, Hong Kong, Singapore, Copenhagen, and Stockholm. 

Saturday, August 30, 2014

The limits to human job displacement

David Autor, arguably the leading academic tracking the technology and other structural shifts induced changes in the labor market, presented an interesting paper at the recently concluded Kansas Fed's annual Jackson Hole meeting. The paper talked about the recent trend of the displacement of middle-paying jobs by computers.
He invokes Karl Polanyi's famous paradox ("we know more than we can tell" - the tacit knowledge of how the world works often exceeds our explicit understanding) to argue that the challenges to substituting machines for workers by computerizing every day tasks (especially those that require adapatability, common sense, and creativity) are possibly insurmountable. He argues that the trend of automation of "middle-skill" jobs is not likely to continue to its logical climax,
While many middle skill tasks are susceptible to automation, many middle skill jobs demand a mixture of tasks from across the skill spectrum... Why are these middle skill jobs likely to persist and, potentially, to grow? My conjecture is that many of the tasks currently bundled into these jobs cannot readily be unbundled - with machines performing the middle skill tasks and workers performing the residual - without a substantial drop in quality... routine and non-­routine tasks will generally coexist within an occupation to the degree that they are complements - that is, the quality of the service improves when the worker combines technical expertise and human flexibility. 
This reasoning suggests that many of the middle skill jobs that persist in the future will combine routine technical tasks with the set of non-routine tasks in which workers hold comparative advantage - interpersonal interaction, flexibility, adaptability and problem-solving. Medical support occupations are one leading example of this virtuous combination, but this example is not a singularity. This broad description also fits numerous skilled trade and repair occupations - plumbers, builders, electricians, HVAC installers, automotive technicians - marketing occupations, and even modern clerical occupations that provide co-ordination and decision-making functions rather than simply typing and filing.
He also argues that the strategy of "machine learning" - "applying statistics and inductive reasoning to supply best guess answers in cases where formal procedural rules are unknown" (or exposure, training, and reinforcement, by stuffing data and using inductive logic) - to overcome Polanyi's Paradox may not be successful. Such machine learning by using a large training database, while useful to recognize features and images, cannot work when the object (say, chair) is also determined by other traits like its potential use (say, a traffic cone) or its location (say, a toilet seat).

However, as FT Alphaville writes, quoting the example of driverless cars, such predictions about the future have limited value given the uncertainties involved. 

Thursday, August 28, 2014

Access to jobs - the "urban divide" visualization

This visualization tool (via Alain Bertaud) developed by the World Bank nicely illustrates the deep divide that exists in physical access to the job market for residents of Buenos Aires using various transit modes - public transit, car, bike, and walking.

The graphic maps (as color codes) the different occupational locations across the city. The interactive facility enables us to map the number of jobs accessible from any residential location, within different commute time zones, using the four transit modes.

The comparative graphic for one area, General San Martin, shows that within a 30 minute commute radius, a car user has access to 14 times more jobs than a public transit user.
Visualization graphics like these give us a great intuitive sense of how successful a city is in achieving its primary objective - connecting residents to jobs. Or how and where it is failing to achieve agglomeration economies of scale. It helps transport planners and city managers plan for urban transit and infrastructure improvement projects so as to minimize commute times. 

The pursuit of smart cities in developing countries can be better served by such (see also this) smart decision-support tools that enable more effective (detailed and real-time) urban planning than by grandiose physical infrastructure and technology projects. 

Wednesday, August 27, 2014

Planning mass transit for urbanizing India

As India urbanizes rapidly, metro-railway projects are being planned in many cities across the country. The Government of India (GoI) have formally declared its support for metro-rail for 2 million plus cities on public procurement, as a joint-venture between the central and state governments. But given the massive upfront expenditures and consequent debt-financing burden, as well as high operating costs, it is important that we critically examine our urban mass transit policy.

Consider this. Experience from across the world, developed and developing, shows that mass transit systems, even the most efficient, are very expensive and have to be heavily subsidized. Not only do they consume massive public grants for construction, generally raised through taxes or federal government grants, but also their operation and maintenance (O&M) require subsidy support. In fact, apart from East Asia, where major share of revenues is from real estate developments, the farebox recovery ratio is less than half the operating expenses. This is all the more so for the most capital intensive of them all, metro rail systems, at-grade, elevated, or underground.

In countries like India, with fiscally strapped state and local governments and a very tariff sensitive demand-side, the risks associated with operating and maintaining good quality metro systems are considerable. State governments will find it difficult to subsidize metro rail systems for too long. Given the difficult political economy surrounding tariff increases, large volumes are the only insurance to atleast slightly mitigate commercial risks. Unfortunately, it is here that many of the Tier II city metro rail project stumble badly.

In this context, let us examine three of the newest metros under planning or development - Kochi, Nagpur, and Vijayawada. 

The Kochi metro, spanning 25.6 km and being built at a cost of over Rs 6000 Cr, is estimated to have a peak passenger per hour per direction (phpdt) of 23621 in 2030. It also estimates annual peak and total traffic growth of 4.4% and 3.5%  respectively in 2015-25 and an initial ridership of 381868, or 19% (a fifth) of the entire 2 million population of the larger Greater Cochin Development Authority (GCDA). The metro rail is most likely to fall short of realizing these traffic forecasts. It didn't help that the traffic forecasts, project DPR, and project construction in Kochi is being done by the same agency, possibly the first time ever for such a large project anywhere in the world. 

Nagpur's City Development Plan (CDP) indicates that public transit forms just 7% of the city's vehicle trips. The Nagpur Metro Project estimates that by 2021, 12.2% of the city population of 2.9 million will use the metro. This assumes a very high displacement from existing buses and other modes. Even assuming this, a number of 363000 commuters per day looks more suited to a BRT or a light rail system than a full-fledged metro. 

As regards Vijayawada, the traffic estimates are even more depressing. Assuming the entire current bus traffic gets displaced and an equivalent volume of traffic gets induced by the formation of a new capital city, both highly unlikely, the total daily traffic in the Vijayawada-Tenali-Guntur corridor would still be only about 50000. To put this in perspective, this is just a little more than the minimum peak phpdt to sustain a metro. Clearly the region just cannot sustain a metro. 

In fact, as this graphic shows, metro is clearly suitable only for very high density corridors in large cities, while other mode choices are superior for less dense corridors.
At a time when state and city government across India have come to view metro rail projects as an aspirational symbol and pressure mounts on GoI to sanction them, it is important that such sanctions be de-politicized and made based on rigorous analysis of traffic forecasts. Urban transit mode choices should be made strictly based on demographic trends and professional traffic forecasts.

This assumes even greater significance since experience from across the world and India show that urban transit traffic forecasts invariably fall short, forcing governments to step in with even more subsidies or skimping on maintenance. If the latter happens, as is more likely, it will pose considerable safety risks and quality deterioration, thereby engendering a negative spiral of lower demand, larger O&M deficits, even more skimping, and so on. Furthermore, as these trends play out, the physical infrastructure, already a blight on urban form, will fall into disuse, dragging down property values in the neighborhood. It could be a very short distance between urban regeneration and urban degeneration. 

Saturday, August 23, 2014

Is labor market regulations a binding constraint on Indian economy?

Even as the interest on reforming India's undoubtedly restrictive labor regulations mount, Pranab Bardhan has an excellent op-ed where he questions whether it is the "only or one of the main constraints" on the revival of India's manufacturing sector. All his arguments are compelling and I am inclined to agree that whether there are other even bigger constraints.

To the list of arguments posited by Prof Bardhan, there is more from the World Bank's Doing Business and Enterprise Surveys. The Enterprise Survey of business owners and top manager sin 4234 firms done in 2006 revealed the following snapshot of binding constraints faced by businesses (small, medium, and large) in both services and manufacturing.
As can be seen, labor regulations come way down in the worry list for businesses. Infrastructure, especially electricity, tax rates, corruption, and credit come much before. Only 5% of firms identified labor regulations as the binding constraint. 

Consider the following two graphics on the distribution of employees by firm size. The first graphic is on distribution of establishment sizes as a share of plants. It does not show a discontinuity anywhere. There is nothing to show that there is a sharp drop in the share of firms at the 100 employees mark, as would have been the case if the Industrial Disputes Act (IDA) were indeed a critical factor.  
The second graphic is a distribution of establishment sizes as a share of all workers employed. Here too, not only is there is no discontinuity but also the share of employees appear to increase monotonically on both sides of the 100 mark.  
Clearly, empirical evidence atleast does not appear to indicate any egregiously disruptive adverse contribution from the IDA or other legislations on the expansion of Indian manufacturing firms into medium and large firms with employment greater than 100. 

None of this is to deny the undoubted damaging influence of our restrictive labor regulations. Their reform would surely contribute to improving the country's business environment. But to claim that labor market reforms can dramatically improve economic prospects, as argued by the likes of Aravind Panagariya, is to basically elevate anecdotes as objective evidence. Such anecdotes gain prominence from high-profile labor disputes and factory lock-outs. 

There are two stories here. One, the overwhelming majority of Indian enterprises start small and informal, and remain like that. Since the typical firm starting operations is likely to start with far less than 100 employees, there is little reason to suggest that the IDA or the Contract Labor Act are important barriers to starting a business. This leads us to the second story of business expansion from small into medium enterprises. Here, the restrictions imposed by IDA surely adds a layer of regulatory cost and is a potential deterrent to growth of business, though far from a prohibitive one, leave alone being a binding constraint. 

Update 1 (26/08/2014)
A recent KPMG-CII report on India's business environment examined, among other areas, the impact of labor market regulations. It finds that labor related approvals are not among the biggest obstacles, as cited by businesses, for starting a business.
Similarly, for running businesses, respondents claimed that skill gap and recruitment problems were a much bigger obstacle than the cost and time required to comply with labor regulations. 
Finally, the regulation of employment - in terms of hiring and redundancy of workers and rigidity of working hours - as captured in the Doing Business Survey finds that India's employee redundancy dismissal requirements are far less onerous than most of its emerging market competitors.