DP12437 Highways, Market Access, and Spatial Sorting

Author(s):	Stephan Fretz, Raphaël Parchet, Frédéric Robert-Nicoud
Publication Date:	November 2017
Date Revised:	March 2019
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

We design a parsimonious spatial equilibrium model featuring workers embodied with heterogeneous skills and nonhomothetic preferences. In equilibrium, locations with improved commuting access become relatively more attractive to the highskilled, high-income earners. We then empirically analyze the effects of the construction of the Swiss highway network between 1960 and 2010 on the distribution of income at the local level, as well as on employment and commuting by education level. We find that the advent of a new highway access within 10km led to a long-term 23% increase in the share of high-income taxpayers and a 7% decrease in the share of low-income taxpayers. Highways also contributed to job and residential urban sprawl.