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New road infrastructure: the effects on firms

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  • 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
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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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