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Commuting, Labor, and Housing Market Effects of Mass Transportation: Welfare and Identification

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  • Christopher Severen

Abstract

REVISED MARCH 2019 This paper studies the effects of Los Angeles Metro Rail on the spatial distribution of people and prices. Using a panel of bilateral commuting flows, I estimate a quantitative spatial general equilibrium model to quantify the welfare benefits of urban rail transit and distinguish the benefits of reduced commuting frictions from other channels. The subway causes a 7%-13% increase in commuting between pairs of connected tracts; I select plausible control pairs using proposed subway and historical streetcar lines to identify this effect. The structural parameters of the model are also estimated and are identified using a novel strategy that interacts tract-specific labor demand shocks with the spatial configuration of the city. These parameters indicate people are relatively unresponsive to changes in local prices and characteristics, implying that the commuting response corresponds to a large utility gain. The welfare benefits by 2000 are significant: LA Metro Rail increases aggregate welfare by $246 million annually. However, these benefits are only about one-third of annualized costs. While benefits did not outweigh costs by 2000, I employ more recent data to show that there are dynamic effects: Commuting continues to increase between connected locations.

Suggested Citation

  • Christopher Severen, 2018. "Commuting, Labor, and Housing Market Effects of Mass Transportation: Welfare and Identification," Working Papers 18-14, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:18-14
    DOI: 10.21799/frbp.wp.2018.14
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    Cited by:

    1. Redding, Stephen & Nakajima, Kentaro & Miyauchi, Yuhei, 2021. "Consumption access and agglomeration: evidence from smartphone data," LSE Research Online Documents on Economics 114353, London School of Economics and Political Science, LSE Library.
    2. Tobias Pfutze & Carlos Rodríguez-Castelán & Daniel Valderrama, 2023. "Urban transport infrastructure and household welfare: evidence from Colombia," Empirical Economics, Springer, vol. 65(3), pages 1409-1432, September.
    3. Tyndall, Justin, 2021. "The local labour market effects of light rail transit," Journal of Urban Economics, Elsevier, vol. 124(C).
    4. Basso, Leonardo J. & Navarro, Matias & Silva, Hugo E., 2021. "Public transport and urban structure," Economics of Transportation, Elsevier, vol. 28(C).
    5. Nathaniel Baum-Snow & Daniel Hartley & Kwan Ok Lee, 2019. "The Long-Run Effects of Neighborhood Change on Incumbent Families," Working Paper Series WP-2019-2, Federal Reserve Bank of Chicago.
    6. Gupta, Arpit & Van Nieuwerburgh, Stijn & Kontokosta, Constantine, 2022. "Take the Q train: Value capture of public infrastructure projects," Journal of Urban Economics, Elsevier, vol. 129(C).
    7. Stephen J. Redding & Daniel M. Sturm, 2024. "Neighborhood effects: Evidence from wartime destruction in London," CEP Discussion Papers dp1986, Centre for Economic Performance, LSE.
    8. Dingel, Jonathan & Tintelnot, Felix, 2020. "Spatial Economics for Granular Settings," CEPR Discussion Papers 14819, C.E.P.R. Discussion Papers.
    9. Sitian Liu & Yichen Su, 2020. "The Geography of Jobs and the Gender Wage Gap," Working Papers 2028, Federal Reserve Bank of Dallas.
    10. Du, Rui & Zheng, Siqi, 2020. "Agglomeration, housing affordability, and new firm formation: The role of subway network," Journal of Housing Economics, Elsevier, vol. 48(C).
    11. Rhiannon Jerch & Panle Jia Barwick & Shanjun Li & Jing Wu, 2020. "Road Rationing Policies and Housing Markets," DETU Working Papers 2004, Department of Economics, Temple University.
    12. Christensen, Peter & Osman, Adam, 2021. "The Demand for Mobility: Evidence from an Experiment with Uber Riders," IZA Discussion Papers 14179, Institute of Labor Economics (IZA).
    13. Gabriel E. Kreindler & Yuhei Miyauchi, 2019. "Measuring Commuting and Economic Activity inside Cities with Cell Phone Records," Boston University - Department of Economics - Working Papers Series WP2020-006, Boston University - Department of Economics, revised Apr 2020.
    14. Priest, Lachlan, 2021. "Transport Access and the Labour Market in the United States," Warwick-Monash Economics Student Papers 17, Warwick Monash Economics Student Papers.

    More about this item

    Keywords

    Subways; Public transit; Commuting; Gravity; Spatial equilibrium;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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