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

2. 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

3. 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

4. The Interstate Highway System

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

6. 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, MSA growth predictive of rays
IV would be useful…

7. The arcsin Argument

8. 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 MSA population growth!

9. 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

10. Results – Long Differences
Regression: change in CC population on change in rays ( )
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…

11. 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?

12. Interesting Robustness Checks
Placebo test
Can rays predict 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 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

13. Conclusion
Counterfactual: without IHS, CC population growth would have been +8% instead of -17% over
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?