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Urban Public Transportation and Firm Location Choice Evidence from the Regional Express Rail of Paris Metropolitan area


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  • Corentin Trevien


  • Thierry Mayer


This paper identifies the causal impact of urban rail transport on firm location. The evaluation of transport infrastructures always faces an important issue of endogeneity since rail lines are not randomly located. We use the natural experiment offered by the Regional Express Rail (RER) in the Paris metropolitan region, which widely improved the commuter train system. We provide two strategies to address the endogeneity issue. The RER network has been implemented with the aim of connecting 'new towns' located 30 km away from the historic center of Paris. Commuter train crosses municipalities located between the historical core and the five new towns of the metropolitan area. These municipalities are 'quasi-randomly' treated and can be compared to similar untreated municipalities in order to estimate the causal impact of railway infrastructures. The second strategy relies on significant differences between the initial plan presented in 1965 and the current network. We combine this rigorous approach of transport infrastructure evaluation with a standard frame of firm location choice. More concretely, we consider both domestic and foreign firm location choices across municipalities of the Paris metropolitan region. In addition to basic criterions as market potential, agglomeration, labor costs and land rent, we add the proximity to a commuter train station and an accessibility index based on travel time variation by public transport. We show that ignoring the endogeneity issue doubles or triples the estimated impact of rail on the market share in firm location of a municipality. The regional market share of a municipality in firm location increases between 4 and 6 % with a station. However, the total number of firms grows durably only if the travel time decreases. Indeed, the quality of the rail connection matters: the more the reduction of time associated with the opening of a new station is high the more the effect of transportation on firm location is important and durable. In addition, the impact of the RER is very strong for foreign firms: FDI location increases by 18 % with the opening of a RER station. Finally, the effect varies across industry sector and turns out to be higher for business services and household services.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa13p566.

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Date of creation: Nov 2013
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Handle: RePEc:wiw:wiwrsa:ersa13p566

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  1. Guy Michaels, 2006. "The effect of trade on the demand for skill - evidence from the interstate highway system," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19767, London School of Economics and Political Science, LSE Library.
  2. Thierry Mayer & Isabelle Méjean & Benjamin Nefussi, 2007. "The Location of Domestic and Foreign Production Affiliates by French Multinational Firms," Working Papers, CEPII research center 2007-07, CEPII research center.
  3. Schmidheiny, Kurt & Brülhart, Marius, 2011. "On the equivalence of location choice models: Conditional logit, nested logit and Poisson," Journal of Urban Economics, Elsevier, vol. 69(2), pages 214-222, March.
  4. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers, Center for Economic Studies, U.S. Census Bureau 04-02, Center for Economic Studies, U.S. Census Bureau.
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  6. Chen, Maggie Xiaoyang & Moore, Michael, 2009. "Location decision of heterogeneous multinational firms," MPRA Paper 33482, University Library of Munich, Germany.
  7. Holl, Adelheid, 2004. "Manufacturing location and impacts of road transport infrastructure: empirical evidence from Spain," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 34(3), pages 341-363, May.
  8. Defever, Fabrice, 2006. "Functional fragmentation and the location of multinational firms in the enlarged Europe," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 36(5), pages 658-677, September.
  9. Fabrice Hatem & Loriane Py, 2009. "Internationalisation et localisation des services : une analyse sectorielle et fonctionnelle appliquée aux firmes multinationales en Europe," Économie et Statistique, Programme National Persée, Programme National Persée, vol. 426(1), pages 67-95.
  10. Stephen Gibbons & Teemu Lyytikäinen & Henry Overman & Rosa Sanchis-Guarner, 2012. "New Road Infrastructure: the Effects on Firms," SERC Discussion Papers, Spatial Economics Research Centre, LSE 0117, Spatial Economics Research Centre, LSE.
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  12. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, Elsevier, edition 1, volume 4, number 4.
  13. Xuepeng Liu & Mary E Lovely & Jan Ondrich, 2010. "The Location Decisions of Foreign Investors in China: Untangling the Effect of Wages Using a Control Function Approach," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 160-166, February.
  14. Adelheid Holl, 2004. "Transport Infrastructure, Agglomeration Economies, and Firm Birth: Empirical Evidence from Portugal," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 44(4), pages 693-712.
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