Distributional and Equity Effects

At a glance

• This guidance considers the distributional and equity effects of transport initiatives (policies, plans and projects). These effects are a concern where they are significant and have disproportionate impacts on particular user groups. They are an important consideration in decision making.
• Distributional impact assessment (DIA) aims to identify and describe, in an objective manner, the distribution of impacts on user groups. In contrast, consideration of the equity implications of distributional impacts, their desirability or otherwise, introduces subjectivity. The underlying value judgements should made explicit and would ideally stem from stated equity objectives.
• A set of principles and process is provided to guide consideration of distributional and equity effects.
• DIA sits alongside CBA as key features of a comprehensive economic assessment. The CBA reports an initiative’s combined net benefit (i.e. total benefits less total costs, with gains and losses added together), indicating the economic efficiency of the initiative. Distributional and equity effects concern the relative impacts across members of society, and the fairness of those outcomes. In other words: CBA is concerned with economic efficiency, or the size of the pie; distributional impacts and equity are concerned with how the pie is divided up.
• The distributional impacts of a transport initiative are the differing impacts across social groups and population segments affected by the initiative. These include changes in money costs of travel, accessibility, mobility, travel time, safety, and environmental changes. For the purposes of considering distributional impacts, people are grouped together according to characteristics such as income, location, occupation, age, disabilities and so on.
• The DIA approach presented here consists of three steps: 1) a screening process; 2) an initial assessment; and 3) an appraisal.
• Consideration of distributional impacts can commence in the option development/design stage, with options developed that address or avoid undesirable distributional impacts. This would particularly be the case where distributional impacts are an important objective of an initiative. Distributional impacts can be important in any of the three stages of the ATAP assessment process — strategic merit test, rapid appraisal, and detailed appraisal. The depth of the distributional assessment will increase as more information becomes available from the CBA at each stage to support the DIA.
• The DIA should be reported in the business case, separately from, but alongside CBA results.
• With consideration of the equity implications of initiatives being normative (that is, a value judgement about the desirability of an outcome), there are no established equity assessment processes as there are for DIA. However, to support decision-makers, analysts should present the results of the DIA in a way that demonstrates how a proposal supports (or hinders) the achievement of stated jurisdictional goals and objectives related to equity, and highlight impacts that might raise concerns.
• Two notions of equity relevant to transport initiatives are discussed — vertical and horizontal equity — with examples provided of each, noting that they sometimes overlap or conflict, requiring trade-offs between them.
• The business case should point out situations where selecting one option over another (including the base case) involves trade-offs between economic efficiency and equity or between different equity considerations. CBA results will enable any sacrifices of economic efficiency accepted to promote equity objectives to be expressed as monetary amounts.
• It is possible to embed judgements about equity in CBAs through use of distributional weights. The consensus in Australia to date has been not to use distributional weights, but rather to convey information about distributional impacts to decision-makers and leave it to them to weigh up efficiency and equity impacts on a case-by-case basis.