Abstract

In this paper we exploit unique longitudinal regional panel data on highway extensions 1990-2014 in the Netherlands to provide new and improved evidence on the effects of highway accessibility on economic activity. We study the effects of adding new lanes to existing highways, on the employment and the real estate construction in the vicinity of these highways. We suggest a new approach to solving the notorious endogeneity issue that hampers unbiased estimation of the highway accessibility effects. Our first results indicate that highway extensions lead to clustering of economic activity in locations near to the highway. Adding 10 kilometre highway lane increases employment and construction in the close vicinity with on average 2%. This comes at the cost of further away locations. Our study of the effects of highways extensions is novel and policy relevant. In the Netherlands for example, hardly any new highway links have been constructed since 1990. Highway extensions, however, were numerous and more extensions are planned in the years to come.