Executive Summary
Introduction
Cities play an important role in encouraging and enhancing regional and national economic development. A key factor behind the economic role of cities is the impact of agglomeration. Agglomeration refers to the productivity benefits that stem from the increasing scale or density of economic activities.
The importance of Auckland, as New Zealand's major city, is reflected in the Government's economic transformation agenda. This recognises Auckland's role as a driver of higher levels of productivity and performance.
Urbanisation and Agglomeration
With growing concentrations of employment and high-value production activities, the economic significance of cities is increasing. This has encouraged major population shifts, contributing to a position where half the world's population is now estimated to reside in urban areas. This trend is also taking place in New Zealand, with Auckland experiencing particularly strong growth.
Given the increasing significance of cities, many have sought to examine the advantages of having large numbers of firms and workers concentrated in particular areas, and the agglomeration benefits that result. The benefits are seen to occur through better input-output linkages, deeper labour markets, and the existence of knowledge spillovers.
Of the overseas agglomeration studies examined in this paper, all studies show a positive relationship between increasing employment scale or density, and productivity. While a broad set of values has been estimated, the evidence suggests that the elasticity of productivity to aggregate city size or density typically lies within the range of 0.03 to 0.06. That is, a doubling of size or density results in productivity rising by between three per cent and six per cent.
A number of factors including congestion, pollution and loss of urban amenity may limit the agglomeration benefits that can be achieved. For instance, to the extent that congestion acts as a constraint, improving accessibility through investment in transport infrastructure, to support higher density employment activities, has been found in the literature to promote improved productivity.
This work therefore points to two essential relationships: the linkage between employment density and productivity, and the linkage between accessibility and employment density.
Building on Overseas Work
The research in this paper builds on work carried out for two major transport infrastructure projects in London (where issues associated with the development of large-scale urban projects and the difficulties of justifying these, given existing evaluation procedures, were also faced). The London work quantified the relationships between accessibility and employment density, and employment density and productivity. For both relationships, particularly high responsiveness was found at high levels of accessibility and employment density. This approach was successfully deployed in subsequent project appraisals.
Recent Developments in Auckland
Recent studies have shown that while the Auckland economy has been performing relatively well, there is evidence that congestion in the central city is limiting the potential agglomeration benefits that may otherwise be achieved. Relaxing accessibility constraints may therefore yield particular benefits in terms of employment and productivity.
The framework for evaluating proposals to improve accessibility into the central area is restrictive. Current procedures recognise the high costs of schemes in urban areas, but the benefits are assessed against a static land-use situation and do not take into account the full effects on urban form and wider economic impacts that are likely to result. This makes it difficult to justify large-scale measures to improve urban accessibility, especially without any assessment of the effects of these schemes. This study is a step towards the development of quantitative relationships for Auckland, against which accessibility-employment density-productivity impacts can be measured. This work is based on information from the 2001 Census, with information on employment density and average earnings at a census area unit level. Accessibility measures derived from regional modelling are at the same level of disaggregation.
Accessibility and Employment Density
At low accessibility levels, any relationship with employment density is difficult to discern. As accessibility increases however, a clear positive relationship emerges. This is particularly so for Auckland City, which typically has high accessibility as well as greater employment density.
Employment Density and Productivity
Having identified the linkages between accessibility and employment density, the next step was to consider the linkages between employment density and productivity. The relationship between employment density and productivity, as measured by average wages for the four cities in the Auckland region, was developed. This presents a strong positive relationship between employment density and average earnings, similar to the position observed in London.
The position for Auckland City on its own indicates a particularly strong relationship, with the CBD zones having high densities and high average incomes. Analyses for the other cities in the Auckland region (Manukau, North Shore and Waitakere) displayed a similar pattern, but with less sensitive relationships. In each case, the linkages were positive, and increasing employment density was associated with increases in productivity.
This paper shows that it is possible to make a quantitative assessment of the potential effects of improvements in accessibility, in terms of both potential employment and the increasing productivity of the workforce as a whole (both of which would contribute to increases in economic output).
Supporting Policy
In practice, to achieve the increases in economic output, a number of supporting measures may be required. This includes a planning framework that will support intensification in areas of improved accessibility, actions to provide the space for any extra employment, and measures to provide training for the workforce or to ensure that appropriate skills are available.
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