Roads, Internal Migration and the Spatial Sorting of US High-Skilled Workers

This paper studies the distributional effects of a major transport infrastructure project, the construction of the US Interstate Highway System. Using data from 1950 to 2000, it first provides reduced-form evidence of the impact of highways on the location choices of heterogeneous workers. In order to address the endogeneity of road placement, I adopt an instrumental variable approach that exploits an initial plan of the network and nationwide construction patterns. I find that a city’s share of college-educated residents increases by 1 percentage point with each additional highway. The associated welfare effects are estimated using a quantitative spatial model in which heterogeneous migration patterns are driven by differences in migration costs across skill groups. Counterfactual experiments show that a hypothetical removal of the Interstate Highway System decreases aggregate welfare by 4.3%. The effect exhibits, however, significant variation across cities and, within cities, across skill groups. These results highlight the potential of transport policies to alter the spatial patterns of welfare inequality