DP12437 Highways, Market Access, and Spatial Sorting

Author(s): Stephan Fretz, Raphaël Parchet, Frédéric Robert-Nicoud
Publication Date: November 2017
Date Revised: June 2021
Keyword(s): Highway, Income sorting, market access, Transportation
JEL(s): D31, H54, O18, R11, R23
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12437

This paper studies the consequences of the construction of a major transportation infrastructure on the sorting of residents and workers with heterogeneous incomes and skills. We design a parsimonious spatial equilibrium model featuring workers embodied with heterogeneous skills and non-homothetic preferences. In equilibrium, locations with improved commuting access become relatively more attractive to the high-skilled, high-income earners. We then empirically analyze the effects of the construction of the Swiss highway network between 1960 and 2010 on the population size and composition of municipalities. We find that the advent of a new highway access within 10km led to a long-term 24% increase in the share of high-income taxpayers and a 8% decrease in the share of low-income taxpayers, impacting segregation by income in connected municipalities. Highways also contributed to changes in commuting patterns, as well as to job and residential urban sprawl.