DP14717 Automobiles and urban density

Author(s): Hans R.A. Koster, Victor Mayland Nielsen, Francis Ostermeijer, Jos van Ommeren
Publication Date: May 2020
Keyword(s): Car ownership, urban density, vehicle costs
JEL(s): R12, R40
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14717

How has the rise of the automobile influenced urban areas over the past century? In this paper we investigate the long-run impact of car ownership on urban population density, based on a sample of 232 city observations in 57 countries. Using the presence of a car manufacturer in 1920 as a source of exogenous variation, our IV estimates indicate that car ownership substantially reduces density. A one standard deviation increase in car ownership rates causes a reduction in population density of around 40%. For employment density we find almost identical results. This result has important implications for vehicle taxation, car ownership growth in developing countries, and new transport technologies such as automated vehicles.