Urban Transformation – Smart Cities, AMRUT, etc.

The road to productivity


From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Labour productivity and roads


The commute time for the labour force to the workplace plays a very important role in determining their productivity in cities.

Issue of long travel time to work

  • Labour market: Cities are labour markets where the labour force exchanges their labour and creates knowledge spillovers.
  • Relation between commute time and productivity: The commute time for the labour force to the workplace plays a very important role in determining their productivity in cities.
  •  The longer the commute time in a city, the smaller is its effective labour market and vice-versa.
  • Difference between nominal and effective labour market: While the nominal labour market of the city refers to all jobs created in the metropolitan area, the effective labour market refers to the jobs accessible within a certain commute.
  • Importance of effective labour market: The larger a city’s effective labour market, the greater its agglomeration economies and knowledge spillovers will be.
  • From the viewpoint of enlarging a city’s effective labour market and economic output, it is therefore very important to keep the commute time short and commuting cost cheap within a city as it keeps growing in population.

Way forward

  • One way in which urban local bodies (ULBs) directly impact the city’s economic output is through their infrastructure.
  • Increase in tax base: Road length has a positive effect on the city’s tax base.
  • Motivation to pay texes: This is because roads lead to easy access to jobs and increased economic activity; that also gives the public more confidence and motivation to pay taxes.
  • Cities should not view investment in road networks as expenditure; rather, roads add to the city’s revenue base which the city can use to improve infrastructure and public services.


Investing in roads not only reduces travel time and enlarges effective labour markets of cities and their economic output, but also improves access to schooling for children as well as healthcare, thereby upgrading human development. This is indeed the road to the $5 trillion economy along with improvement in human well-being.

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