Transport infrastructure investment, accessibility change and firm productivity: Evidence from the Seoul region

Abstract

This study explores how and to what extent transport infrastructure investment affects the level of agglomeration and consequently impacts on firm productivity, using transport network data and micro-data for manufacturing firms in the Seoul region. A first-difference model with novel instrument variables is developed to obtain more precise results than those in previous studies, and the partial arbitrariness that exists in previous studies is reduced by using the estimated spatial-decay parameter. An accessibility indicator derived from a multi-modal travel model is also applied to increase the accuracy in the measurement of agglomeration. It is found that an increase in the degree to which transport infrastructure investment improves the level of agglomeration raises firm productivity, with a best estimated elasticity of 0.0452. The finding highlights the key role of transport infrastructure investment in strengthening the level of agglomeration and the resulting economic advantages for production and economic actors. It is suggested that a policy for transport projects be implemented to maximise their cost effectiveness and ensure that agglomeration is promoted in the area where they are developed.