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What Is the Connection between Transportation and Economic Growth?

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  • Written By: Peter Hann
  • Edited By: Angela B.
  • Last Modified Date: 21 November 2016
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Transportation and economic growth are closely connected, in large part because businesses require good-quality roads, bridges and tunnels to enable them to transport goods to their distribution outlets and customers. A good rail network also helps in the transportation of goods to customers and employees to their workplace. A network of natural or artificial internal waterways may enable relatively cheap transport of bulky goods and equipment and may facilitate the transport of agricultural produce. International road, rail, sea and air transport can boost international trade and enable domestic businesses to expand into international markets.

Within a country, the supply chain from the location of raw materials to factories can be made faster and more efficient if suitable road, rail and waterway links are available for transport of materials. The delivery of finished goods from the factory gate to distributors within different regions of the country depends on a national transport network that can cope with the amount of goods being transported within the economy. For countries with a large land area and long distances between the place of manufacture and the markets, this is especially important. Examples of the link between transportation and economic growth include the development of rail and canal networks during the industrial revolution in England.

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The link between transportation and economic growth is clear in the area of international trade. Countries engaging in international trade require sophisticated transport hubs that can receive and pass on freight received from abroad in addition to helping domestic companies export their goods. These transport hubs may be airports, seaports or inland dry ports that are connected to sea or air ports by road, rail or inland waterway links. Fast transport links with the outside world can speed delivery times to foreign destinations and reduce costs for exporters. The combination of international transportation links and domestic transport can ensure that imports into a country are distributed quickly and at low cost.

Certain international transport projects have increased the economic growth of the world by drastically reducing transport routes or speeding delivery times. The completion of the Suez Canal reduced transport times between Europe and Asia by avoiding the need to sail round the Cape of Good Hope. Similarly, the Panama Canal enabled quick travel between the Atlantic and Pacific oceans. Rail links such as the Trans-Siberian railway also have assisted national and world economic growth by opening new markets and new sources of raw materials. The link between transportation and economic growth also is demonstrated by the first transcontinental railroad joining the East and West coasts of the United States, providing a boost to growth that opened up new possibilities for trade and development.

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