IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/58527.html
   My bibliography  Save this paper

New road infrastructure: the effects on firms

Author

Listed:
  • Gibbons, Stephen
  • Lyytikainen, Teemu
  • Overman, Henry G.
  • Sanchis-Guarner, Rosa

Abstract

This paper estimates the impact of road improvements on firm employment and productivity using plant level longitudinal data for Britain. Exposure to transport improvements is measured by changes in employment accessibility along the road network. These changes are constructed using data on employment for small geographical units, details of the main road network and of road construction schemes carried out between 1998 and 2007. We deal with the central problem of endogenous scheme placement by using changes due to new road links and exploiting the spatial detail in our data to focus on accessibility changes close to new schemes. We find substantial effects on employment and numbers of plants for small-scale geographical areas (electoral wards), but no employment response at plant level. This suggests that road construction affects firm entry and exit, but not the employment of existing firms. We also find effects on labour productivity and wages at the firm level, although these results are less robust.

Suggested Citation

  • Gibbons, Stephen & Lyytikainen, Teemu & Overman, Henry G. & Sanchis-Guarner, Rosa, 2012. "New road infrastructure: the effects on firms," LSE Research Online Documents on Economics 58527, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58527
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/58527/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gabriel M. Ahlfeldt & Arne Feddersen, 2010. "From periphery to core: economic adjustments to high speed rail," Working Papers 2010/38, Institut d'Economia de Barcelona (IEB).
    2. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2011. "Spatial concentration and plant-level productivity in France," Journal of Urban Economics, Elsevier, vol. 69(2), pages 182-195, March.
    3. Paul Anderson & David Levinson & Pavithra Parthasarathi, 2011. "Accessibility Futures," Working Papers 000088, University of Minnesota: Nexus Research Group.
    4. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    5. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    6. Criscuolo, Chiara & Martin, Ralf & Overman, Henry & Van Reenen, John, 2012. "The Causal Effects of an Industrial Policy," IZA Discussion Papers 6323, Institute of Labor Economics (IZA).
    7. Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A "Market Access" Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 799-858.
    8. Combes, Pierre-Philippe & Lafourcade, Miren, 2001. "Transport Cost Decline and Regional Inequalities: Evidence from France," CEPR Discussion Papers 2894, C.E.P.R. Discussion Papers.
    9. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2011. "Spatial concentration and plant-level productivity in France," Journal of Urban Economics, Elsevier, vol. 69(2), pages 182-195, March.
    10. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    11. Stephane Straub, 2011. "Infrastructure and Development: A Critical Appraisal of the Macro-level Literature," Journal of Development Studies, Taylor & Francis Journals, vol. 47(5), pages 683-708.
    12. Remi Jedwab & Alexander Moradi, 2016. "The Permanent Effects of Transportation Revolutions in Poor Countries: Evidence from Africa," The Review of Economics and Statistics, MIT Press, vol. 98(2), pages 268-284, May.
    13. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    14. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
    15. Gilles Duranton & Matthew A. Turner, 2011. "The Fundamental Law of Road Congestion: Evidence from US Cities," American Economic Review, American Economic Association, vol. 101(6), pages 2616-2652, October.
    16. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 319-349, June.
    17. Ahlfeldt, Gabriel M. & Wendland, Nicolai, 2011. "Fifty years of urban accessibility: The impact of the urban railway network on the land gradient in Berlin 1890-1936," Regional Science and Urban Economics, Elsevier, vol. 41(2), pages 77-88, March.
    18. Rosina Moreno & Enrique López-Bazo, 2007. "Returns to Local and Transport Infrastructure under Regional Spillovers," International Regional Science Review, , vol. 30(1), pages 47-71, January.
    19. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
    20. Nathaniel Baum-Snow, 2010. "Changes in Transportation Infrastructure and Commuting Patterns in US Metropolitan Areas, 1960-2000," American Economic Review, American Economic Association, vol. 100(2), pages 378-382, May.
    21. Gilles Duranton & Matthew A. Turner, 2012. "Urban Growth and Transportation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1407-1440.
    22. Gilles Duranton & Peter M. Morrow & Matthew A. Turner, 2014. "Roads and Trade: Evidence from the US," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 681-724.
    23. John G. Fernald, 1999. "Roads to Prosperity? Assessing the Link between Public Capital and Productivity," American Economic Review, American Economic Association, vol. 89(3), pages 619-638, June.
    24. Garcia-López, Miquel-Ángel & Holl, Adelheid & Viladecans-Marsal, Elisabet, 2015. "Suburbanization and highways in Spain when the Romans and the Bourbons still shape its cities," Journal of Urban Economics, Elsevier, vol. 85(C), pages 52-67.
    25. Benjamin Faber, 2014. "Trade Integration, Market Size, and Industrialization: Evidence from China's National Trunk Highway System," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1046-1070.
    26. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2020. "On the road: Access to transportation infrastructure and economic growth in China," Journal of Development Economics, Elsevier, vol. 145(C).
    27. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
    28. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    29. J. Vernon Henderson, 2001. "Marshall's Scale Economies," Working Papers 2001-46, Brown University, Department of Economics.
    30. Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
    31. Adelheid Holl, 2004. "Transport Infrastructure, Agglomeration Economies, and Firm Birth: Empirical Evidence from Portugal," Journal of Regional Science, Wiley Blackwell, vol. 44(4), pages 693-712, November.
    32. Anthony J. Venables, 2007. "Evaluating Urban Transport Improvements: Cost-Benefit Analysis in the Presence of Agglomeration and Income Taxation," Journal of Transport Economics and Policy, University of Bath, vol. 41(2), pages 173-188, May.
    33. Gilles Duranton & J. V. Henderson & William C. Strange (ed.), 2015. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 5, number 5.
    34. Holl, Adelheid, 2004. "Manufacturing location and impacts of road transport infrastructure: empirical evidence from Spain," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 341-363, May.
    35. Adelheid Holl, 2012. "Market potential and firm-level productivity in Spain," Journal of Economic Geography, Oxford University Press, vol. 12(6), pages 1191-1215, November.
    36. Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
    37. Roger Vickerman & Klaus Spiekermann & Michael Wegener, 1999. "Accessibility and Economic Development in Europe," Regional Studies, Taylor & Francis Journals, vol. 33(1), pages 1-15.
    38. Yang, Yang, 2017. "Transport Infrastructure, City Productivity Growth and Sectoral Reallocation: Evidence from China," RIEI Working Papers 2017-08, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration.
    39. BEHRENS, Kristian & LAMORGESE, Andrea R. & OTTAVIANO, Gianmarco I.P. & TABUCHI, Takatoshi, 2005. "Testing the ‘home market effect’ in a multi-country world," LIDAM Discussion Papers CORE 2005055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    40. Holtz-Eakin, Douglas, 1994. "Public-Sector Capital and the Productivity Puzzle," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 12-21, February.
    41. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    42. Cletus C. Coughlin & Eran Segev, 2000. "Location Determinants of New Foreign‐Owned Manufacturing Plants," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 323-351, May.
    43. Adam Ozimek & Daniel Miles, 2011. "Stata utilities for geocoding and generating travel time and travel distance information," Stata Journal, StataCorp LP, vol. 11(1), pages 106-119, March.
    44. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g8mc6ihim is not listed on IDEAS
    45. Piyapong Jiwattanakulpaisarn & Robert B. Noland & Daniel J. Graham & John W. Polak, 2009. "Highway infrastructure and state‐level employment: A causal spatial analysis," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 133-159, March.
    46. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    47. Daniel J. Graham, 2007. "Agglomeration, Productivity and Transport Investment," Journal of Transport Economics and Policy, University of Bath, vol. 41(3), pages 317-343, September.
    48. Li, Han & Li, Zhigang, 2013. "Road investments and inventory reduction: Firm level evidence from China," Journal of Urban Economics, Elsevier, vol. 76(C), pages 43-52.
    49. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
    50. Michael L. Lahr & Rodrigo Duran & Anupa Varughese, 2004. "Estimating the Impact of Highways on Average Travel Velocities and Market Size," Urban/Regional 0403009, University Library of Munich, Germany.
    51. Adelheid Holl, 2004. "Start-ups and relocations: Manufacturing plant location in Portugal," Economics of Governance, Springer, vol. 83(4), pages 649-668, October.
    52. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-180, February.
    53. Nathaniel Baum-Snow & Loren Brandt & J. Vernon Henderson & Matthew A. Turner & Qinghua Zhang, 2016. "Highways, Market Access and Urban Growth in China," SERC Discussion Papers 0200, Centre for Economic Performance, LSE.
    54. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2016. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," Economic Journal, Royal Economic Society, vol. 126(591), pages 317-357, March.
    55. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8mc6ihim is not listed on IDEAS
    56. Holl, Adelheid, 2016. "Highways and productivity in manufacturing firms," Journal of Urban Economics, Elsevier, vol. 93(C), pages 131-151.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rosa Sanchis-Guarner, 2012. "Driving Up Wages: The Effects of Road Construction in Great Britain," SERC Discussion Papers 0120, Centre for Economic Performance, LSE.
    2. Holl, Adelheid, 2016. "Highways and productivity in manufacturing firms," Journal of Urban Economics, Elsevier, vol. 93(C), pages 131-151.
    3. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    4. Claudia N. Berg & Uwe Deichmann & Yishen Liu & Harris Selod, 2017. "Transport Policies and Development," Journal of Development Studies, Taylor & Francis Journals, vol. 53(4), pages 465-480, April.
    5. Puga, Diego, 2008. "Agglomeration and cross-border infrastructure," EIB Papers 9/2008, European Investment Bank, Economics Department.
    6. Konno, Akio & Kato, Hironori & Takeuchi, Wataru & Kiguchi, Riku, 2021. "Global evidence on productivity effects of road infrastructure incorporating spatial spillover effects," Transport Policy, Elsevier, vol. 103(C), pages 167-182.
    7. Kailthya, Subham & Kambhampati, Uma, 2022. "Road to productivity: Effects of roads on total factor productivity in Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 174-195.
    8. Bruno de Borger & Ismir Mulalic & Jan Rouwendal, 2019. "Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge," Tinbergen Institute Discussion Papers 19-065/VIII, Tinbergen Institute.
    9. Wang, Xu & Xie, Zhuan & Zhang, Xiaobo & Huang, Yiping, 2018. "Roads to innovation: Firm-level evidence from People's Republic of China (PRC)," China Economic Review, Elsevier, vol. 49(C), pages 154-170.
    10. Bruno de Borger & Ismir Mulalic & Jan Rouwendal, 2019. "Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge," Tinbergen Institute Discussion Papers 19-065/VIII, Tinbergen Institute.
    11. Wu, Guiying Laura & Feng, Qu & Wang, Zhifeng, 2021. "A structural estimation of the return to infrastructure investment in China," Journal of Development Economics, Elsevier, vol. 152(C).
    12. Mayer, Thierry & Trevien, Corentin, 2017. "The impact of urban public transportation evidence from the Paris region," Journal of Urban Economics, Elsevier, vol. 102(C), pages 1-21.
    13. He, Guojun & Xie, Yang & Zhang, Bing, 2020. "Expressways, GDP, and the environment: The case of China," Journal of Development Economics, Elsevier, vol. 145(C).
    14. Florian Mayneris, 2017. "Effets des infrastructures de transport sur le niveau et la localisation des activités économiques," LIDAM Discussion Papers IRES 2017023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    15. David B Audretsch & Dirk Christian Dohse & João Pereira dos Santos, 0. "The effects of highway tolls on private business activity—results from a natural experiment," Journal of Economic Geography, Oxford University Press, vol. 20(6), pages 1331-1357.
    16. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    17. Lee, Jae Kwang, 2021. "Transport infrastructure investment, accessibility change and firm productivity: Evidence from the Seoul region," Journal of Transport Geography, Elsevier, vol. 96(C).
    18. Ciani, Emanuele & de Blasio, Guido & Poy, Samuele, 2022. "A freeway to prosperity? Evidence from Calabria, South of Italy," Economics of Transportation, Elsevier, vol. 29(C).
    19. Barzin, Samira & D'Costa, Sabine & Graham, Daniel J., 2018. "A pseudo – panel approach to estimating dynamic effects of road infrastructure on firm performance in a developing country context," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 20-34.
    20. Graham, Daniel J. & Gibbons, Stephen, 2019. "Quantifying Wider Economic Impacts of agglomeration for transport appraisal: Existing evidence and future directions," Economics of Transportation, Elsevier, vol. 19(C), pages 1-1.

    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)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:58527. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.