Did Highways Cause Suburbanization? Nate Baum-Snow Quarterly Journal of Economics, 2007 Presented to Ec-2333 on 2/28/2014 by Josh Abel

Introduction 1950 – 1990: population in center cities falls, population in MSAs rises Interstate Highway System (IHS) is constructed CAUSUAL RELATIONSHIP? Exogeneity of IHS is central to argument Results Yes, causal impact from IHS on suburbanization Additional interstate through city causes 18% CC population reduction Not much said on dynamics or mechanism Comment: Reminiscent of Michaels (2008) But Baum-Snow (2007) more “pure” economic history

Theory Alonso-Muth-Mills framework for spatial decisions Commuting costs make proximity to CC valuable IHS reduces commuting costs, spreads population out Reduction in costs increases income, raising demand for space – also pushes toward spreading out

The Interstate Highway System http://lawprofessors.typepad.com

Measuring IHS Acces A “ray” connects CC with outside Highway passing through city = 2 rays Austin, TX

Exogeneity of IHS Plausible that suburbanization actually caused placement of IHS First-order concern! Legislation: “…so located as to connect by routes as direct as practicable, the principal metropolitan areas, cities, and industrial centers, to serve the national defense, and to connect at suitable border points with the routes of continental importance in the Dominion of Canada and the Republic of Mexico…” Nothing about reducing intra-MSA commute time Michaels (2008) “arcsin” argument IHS access more likely if due-N, -S, -E, -W of CC Consistent with exogenous placement of IHS But, 1940-1950 MSA growth predictive of rays IV would be useful…

The arcsin Argument

The 1947 Map Preliminary plan developed in 1947 Not yet touched by political and legislative processes Strong predictor of actual IHS rays Cannot be predicted from 1940-1950 MSA population growth!

Preliminary Evidence For story to make sense, suburbs should develop along rays Census-tract level regressions Indicate that population was denser closer to rays Not a complete story No attempt to address reverse causality Reality check

Results – Long Differences Regression: change in CC population on change in rays (1950-1990) One observation for each MSA Marginal impact of ray: -6% to -12% Increases somewhat if exclude geographically constrained MSAs IV estimates are somewhat larger This is opposite of simple reverse causality story from above Perhaps hidden “suburban rays” developed that were missed by his measure Suburban rays negatively correlated with rays, positively with planned rays But maybe there are unobserved city effects biasing us…

Results – Panel Data Framework to correct for city fixed effects Has its own difficulties, though Is 10 years enough to see our effects? 20? Measurement error: timing within the decade is crucially important OLS effect disappears, IV results are similar to long difference results Suggests measurement error is causing problems Question (MY CONFUSION): how does the IV panel regression work? Where does the within-MSA variation come from? Does he just rescale actual rays at time t by PlannedT/ActualT?

Interesting Robustness Checks Placebo test Can rays predict 1910-1950 changes in CC population? If so, that would be worrying Either IHS was responding to previous suburbanization Or something spurious is driving them both Fortunately, it passes the placebo test: rays don’t predict 1910-1950 suburbanization One control, MSA population growth could be endogenous Not accounting for this biases estimate toward 0 Instrument with January rainfall Glaeser et al (2001) show good weather is one of the best predictors of metropolitan growth in that time period Results hardly change

Conclusion Counterfactual: without IHS, CC population growth would have been +8% instead of -17% over 1950-1990. Firm migration was more rapid than residential migration Maybe highways increased distance over which agglomeration could occur Suggests limit to usefulness of AMM, since not everyone is commuting to CC Dynamics? Who moves when? Interactions between firms and residents Do we need critical mass? If so, how do we get it?