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New road infrastructure: the effects on firms

Author

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  • Overman, Henry
  • Gibbons, Steve
  • Lyytikainen, Teemu
  • Sanchis-Guarner, Rosa

Abstract

This paper estimates the impact of new road infrastructure on employment and productivity using plant level longitudinal data for Britain. Exposure to transport improvements is measured through changes in accessibility, which is calculated at a detailed geographical scale from changes in minimum journey times along the road network. These changes are induced by the construction of new road link schemes. We deal with the potential endogeneity of scheme location by identifying the effects of changes in accessibility from variation across wards close to the scheme. We find substantial positive effects on employment and numbers of plants for small-scale geographical areas (electoral wards). In contrast, for firms already in the area we find negative effects on employment coupled with increases in output per worker and wages. A plausible interpretation is that new transport infrastructure attracts transport intensive firms to an area, but with some cost to employment in existing businesses.

Suggested Citation

  • Overman, Henry & Gibbons, Steve & Lyytikainen, Teemu & Sanchis-Guarner, Rosa, 2016. "New road infrastructure: the effects on firms," CEPR Discussion Papers 11239, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11239
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    More about this item

    Keywords

    Productivity; Employment; Accessibility; Transport;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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