Transitway investment and nearby commercial gentrification

Abstract

Transitway investment often has an unintended negative consequence of commer- cial gentrification – the process by which land-use changes devalue some land and increase value for others, leading to business turnover that particularly affects small firms. Using cross sectional data on over 24,000 establishment-year observations of retail stores, restaurants and personal services establishments, we examine how the construction and opening of the Green Line Light Rail Transit in Minneapolis and St. Paul affected sales volume and employment at nearby businesses. Using pre-and-post construction local polynomial regressions, we find that establishments within about 750 meters of a new transit station are negatively affected by transit station opening, and integrate this distance threshold into event study difference-in-differences mod- els that allow us to estimate how treatment effects change over time. We find that single location firms’ sales volumes begin to experience a 13% reduction (compared to untreated establishments) about two years after LRT becomes operational but are unaffected during construction. By contrast establishments owned by firms with mul- tiple locations do not experience significant sales volume effects. Employment at both types of establishments was unaffected. We test the robustness of models and explore potential explanations for results.