Empirical Study of Economic Spillovers of Interstate 105 in Los Angeles County

Many researchers agree that at this time new investments in highways in the United States have little impact on overall growth in output. New highways play a more important role in shifting economic activities among places, drawing jobs from other locations into the highway corridors—a phenomenon known as negative spillovers. Testing the hypothesis of economic spillovers of highway investment at the metropolitan level is the objective. Empirical tests of the spillover hypothesis are conducted with census tracts as the unit of observation. Results of the quasi-experiment reveal census tract employment growth patterns that confirm the existence of negative spillovers caused by the 1993 opening of Los Angeles County's Interstate 105. The benefiting area, which is limited to a long narrow corridor around the highway, grew substantially after the highway was opened, while nearby locations outside the corridor experienced slow growth relative to the rest of the metropolitan area, after controlling for various factors. These results show that negative spillovers from new highways are present not only at the aggregate geographic level, such as states or counties, as demonstrated in the literature, but also at the highly localized level, that is, in a metropolitan area.