Motorways, local economic activity and commuting

ABSTRACT

This paper investigates the causal effects of the development of the Portuguese motorway network between 1981 and 2011 on the size of the local economy and the commuting of workers. We use instrumental variables based on transport networks from the late 18th century and 1945 as sources of pseudo-random variation for the location of motorways. The analysis shows that motorways have a strong effect on cross-municipal worker mobility, in terms of both incoming and outgoing commuters. We also find that motorways have a strong effect on the growth of business turnover and gross value added at the local level. Our results are robust to an extensive battery of sensitivity analyses.

KEYWORDS:

• transport infrastructure
• motorways
• employment
• commuting
• local economy
• instrumental variables

JEL:

• O18
• R11
• R49
• R58

ACKNOWLEDGEMENTS

We are grateful to the anonymous referees for their useful comments and suggestions. We also thank Paulo Morgado Sousa for sharing his data on the 1800 itineraries and the 1945 National Road Plan.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. These variables were sourced from INE (Statistics Portugal). Business turnover and GVA refer to non-financial firms (including independent workers) and are calculated by INE using administrative firm-level data. In its original form, GVA is allocated in its totality to the headquarters of the firm. We adjust GVA for this geographical distortion by considering its relationship with both business turnover at the establishment level and local employment. The procedures are detailed in sections 4.2 and 4.3.

2. That is, equation (1) is equivalent to: $\ln y_{i,2011}-\ln y_{i,t_0}=\alpha +\stackrel{⌣}{\theta }\ln y_{i,t_0}+\dots ,$ $\mathrm{w}\mathrm{i}\mathrm{t}\mathrm{h}\stackrel{⌣}{\theta }=\theta -1.$

3. The country has two metropolitan areas, which were officially established in 1991. They concentrate about half of the population and jobs in mainland Portugal. For the suburbanization dynamics that were observed between 1981 and 2011, see Rocha et al. (2023, passim).

4. At the (mainland) country level, in 1991 approximately 75% of the jobs were held by residents in the municipality where their jobs were located. That share decreased to around 66% in 2011.

5. As part of our robustness analysis in section 4.3, we consider other explanatory variables. First, we exclude motorways with no access nodes; and second, we consider the distance of the municipality centroid to the nearest motorway access node.

6. These numbers refer to the pre-1998 administrative division of the country. Currently mainland Portugal has 278 municipalities. In our empirical implementation we use 270 municipalities, as, to ensure fully comparability for all variables across time, we had to exclude the five municipalities from which the three municipalities created in 1998 were formed.

7. The arguments for the identification strategy in this section draw from section 4.2 in Rocha et al. (2023). The first instrument comes from Matos (1980), which was digitalized with geographical information system (GIS) software by Sousa (2010). According to Martins (2014), the map by Matos (1980) reflects essentially information published in 1767. The same author notes that in 1748 the historical list of itineraries is almost the same as in 1767.

8. The maximum speed limit on 1st class roads is 100 or 80 km/h. The maximum speed limit on current motorways is 120 km/h.

9. For comparison, motorization rates in recent years are around 500 cars per 1000 inhabitants.

10. In 2017, the travel and tourism sector represented a direct (total) contribution of 6.8% (17.3%) of GDP. For comparison, in the EU this share was 3.9% (11.7%) (World Travel & Tourism Council (WTTC), 2018).

11. This is the main objective of Rocha et al. (2023). Although our present specification is slightly different (e.g., we use a more complete set of control variables) and the sample is slightly smaller, since we consider 270 municipalities instead of 275 (see note 6 above), the estimates in both papers are similar.

12. Between 1981 and 2011, motorways were built in 153 municipalities. Of these, 90 (63) had a population density lower than 150 (100) inhabitants/km² in 1981 (as a reference we consider the threshold of 150 inhabitants/km² used by the Organisation for Economic Co-operation and Development (OECD) to identify ‘predominantly rural’ regions; www.oecd.org/regional/regional-statistics/geographical-definitions.htm).

13. As noted in section 2, what is needed is a proxy whose logarithm approximates closely the cross-sectional variation of the log of (unobserved) turnover in 1981 (i.e., it is indifferent if we use as a proxy variable $r$ or $\lambda r^{\psi }$ with arbitrary $\lambda ,\psi >0$; the estimates of our coefficient of interest, $\text{β}$, would be identical).

14. Our results on business turnover and GVA are in real terms. If we deflate the dependent variable for the 30- or 20-year inflation, we obtain $\ln y_{i,2011}+\ln \left(1/\right(1+inflation\left)\right).$ The second term is a constant and, therefore, has no influence on the estimation of the coefficient of interest.

15. Ramos’s approach to estimate local GDP per capita is detailed in Table A1 in the supplemental data online.

16. That is, 18 minus the coefficient on ‘outgoing’ jobs, that is, workers who reside in municipality $i$, but work elsewhere. For completeness, we also report this coefficient in the supplemental data online.

Additional information

Funding

This study was supported by the Fundação para a Ciência e a Tecnologia [grant numbers PTDC/EGEECO/28805/2017, UIDB/05069/2020 and UIDB/04625/2020].