Abstract
This paper uses data on the location and movement of establishments and employment in London to estimate the impact of a metro opening on the spatial distribution of economic activity. In addition to fixed effect methods, we employ a planned-route instrumental variables methodology which uses planned but abandoned metro alignments. We find that areas within walking distance to stations experience a positive effect, whereas areas further but still within 2000 m experience a significant negative impact. Our results provide empirical evidence for the model of Redding and Turner (2015) as areas close to the transport scheme but not subject to it are worse off than areas further away. The results suggest no growth, only displacement on the local level: the metro shifted economic activity closer to the stations.
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