2022 Volume 77 Issue 5 Pages I_95-I_105
This study examines the causal impact of highways on the Japanese economy, with a focus on quantifying the impact on the industrial sector. The highway network has expanded remarkably in Japan after the Second World War. The understanding of the effect of the highway investments so far is really helpful for planning the project of the highway construction in the future. Following Donaldson and Hornbeck (2016), we formulate the general equilibrium trade model and theoretically derive the relationship between “market access” and land value. We estimate the impact of market access and agglomeration economies on land values, using the data about land values in 222 Urban Employment Area (UEA). To deal with the identification issues caused by reverse causality or omitted variables, we rely on an instrumental variable (IV) approach. The results show that the land values are affected strongly by market access and population density.
