Transport development performance with hazard-inducing variables: A frontier-based shadow pricing approach

Abstract

While economic growth in a country can be spurred by the expansion of the transportation sector, traffic accidents resulting from an increase in vehicle numbers negatively impact social wellbeing. To integrate both the beneftis and costs in evaluating the transportation sector, this study incorporates traffic accidents as a risk factor (undesirable output) in analyzing the performance of road transportation across Chinese provinces. We propose a shadow price model to estimate the revenue generated and the losses incurred from the addition of each vehicle. The potential improvements in desirable outputs (freight and passenger traffic) and the possible reduction in risks (traffic accident losses) are assessed using a nonparametric approach. Our findings indicate that the overall performance of the Chinese transportation sector improved between 2001 and 2018. During this period, the shadow revenue of vehicles increased, while the shadow loss from traffic accidents showed a declining trend, attributed to enhanced transportation infrastructure and effective government regulations. However, we observe regional disparities in performance and offer targeted policy recommendations.