Social Profitability Threshold of High Speed Railway: A Benefit-Cost Analysis

Abstract

In this study, the benefit-cost analysis technique for projects evaluation is applied to determine the minimum level of demand that makes a high-speed rail project economically viable in Spain. To get this goal, it is necessary to take into account not only the costs and benefits of the high speed railway but also the analysis of the costs and benefits linked to other alternative transport modes, such as plane, private car or bus. The results show that the high-speed rail studied is socially profitable from a traffic volume of 6.5 million passengers and for a social discount rate of 4%. Given the benefits associated with network effects, which magnitude grows parallel to the extension of the high-speed network, this threshold could be significantly reduced in subsequent projects.