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SERC/Urban and Spatial Programme Discussion Paper
New Road Infrastructure: The Effects on Firms
Stephen Gibbons, Teemu Lyytikäinen, Henry G. Overman and Rosa Sanchis-Guarner
May 2017
Paper No' SERCDP0214:
Full Paper (pdf)

JEL Classification: D24; O18; R12

Tags: productivity; employment; accessibility; transport

This paper estimates the impact of new road infrastructure on employment and labour productivity using plant level longitudinal data for Britain. Exposure to transport improvements is measured through changes in accessibility, calculated at a detailed geographical scale from changes in minimum journey times along the road network. These changes are induced by the construction of new road link schemes. We deal with the potential endogeneity of scheme location by identifying the effects of changes in accessibility from variation across small-scale geographical areas close to the scheme. We find substantial positive effects on area level employment and number of plants. In contrast, for existing firms we find negative effects on employment coupled with increases in output per worker and wages. A plausible interpretation is that new transport infrastructure attracts transport intensive firms to an area, but with some cost to employment in existing businesses.