Urban Transport Expansions, Employment Decentralization, and the Spatial Scope of Agglomeration Economies

This paper investigates the relationships between urban highway construction and the decentralization of jobs and workers’ residential locations by industry between 1960 and 2000. Estimates indicate that highways cause significantly greater amounts of residential than job decentralization both overall and in each broad industry category. Identification of these treatment effects relies on exogenous variation available from planned portions of the federal highway system and variation across cities in the number of highways received due to these cities’ relative locations. Each radial highway displaced an estimated 16 percent of the central city working population but only 6 percent of the jobs to the suburbs. These estimates are fairly consistent across industry. Viewed in the context of a standard urban spatial equilibrium model, these estimates indicate that local spillovers remain an important incentive for firms to to cluster spatially in most industries, even in the face of transportation cost reductions. Results indicate that finance, insurance and real estate, transportation, communications and public utilities and services experience the strongest productivity advantages of density and