Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge

Productivity effects of an exogenous improvement in transport infrastructure: accessibility and the Great Belt Bridge

Abstract

Most studies of the effects of transport infrastructure on the performance of individual
firms have focused on marginal expansions of the rail or highway network over time. In this
paper, we study the short-run effects of a large discrete shock in the quality of transport
infrastructure, viz. the opening of the Great Belt bridge connecting the Copenhagen area with a
neighbouring island and the mainland of Denmark. We analyse the effect of the opening of the
bridge on the productivity of firms throughout the country using a two-step approach: we
estimate firm- and year-specific productivity for a large panel of individual firms, using the
approaches developed by Levinsohn and Petrin (2003) and De Loecker (2011). Then,
controlling for firm-fixed effects, we relate productivity to a calculated measure of accessibility
that captures the effect of the opening of the bridge. We find large productivity effects for firms
located in the regions near the bridge, especially for relatively small firms in the construction
and retail industry. Estimation results further suggest statistically significant but small positive
wage effects throughout the country, even in regions far from the bridge. Finally, there is some
evidence that the bridge has stimulated new activities in the Copenhagen region at the expense
of firms disappearing on the neighbouring island Funen.

 

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