Do Winners Win More from Transport Megaprojects? Evidence from the Great Seto Bridge in Japan

Economists are increasingly concerned with the heterogeneous impacts of transportation infrastructure investments on economic outcomes, particularly the phenomenon known as the “Straw Effect†: Core cities that were already in economic prosperity may gain more, and peripheral cities may lose, from transportation megaprojects. We empirically investigate whether such an effect manifests in the case of the Great Seto Bridges in Japan, a 70-billion-dollar project implemented in the 1980s-1990s as part of the “Building-a-New-Japan†initiative. We employ the recentered instrumental variable approach in the difference-in-differences design, exploiting the sharp decline in transport costs and its unexpected impacts on market access across cities as the exogenous sources of variation. Contrary to the Straw Effect, we find that large peripheral cities gain more than core cities from the megaproject, demonstrating that the distribution of winners and losers from the megaproject depends on how the transport cost reductions pass through in the existing network structures.