[ Abstract / Highlights ]
Economists are increasingly concerned with the heterogeneous impacts of transportation infrastructure investments on economic outcomes, particularly the phenomenon known as the “Straw Effect”: Core cities that were already in economic prosperity may gain more, and peripheral cities may lose, from large transportation projects. We empirically investigate whether such an effect manifests in the case of the Great Seto Bridges in Japan, a 70-billion-dollar project implemented as part of the “Building-a-new-Japan” initiative in the 1980s-1990s. We employ the recently developed recentered instrumental variable approach in the difference-in-differences design, exploiting the sharp decline in transport costs and its differential impacts on market access levels across cities of different economic prosperity as exogenous sources of variation. We find that, contrary to the straw effect, large peripheral cities gain more than core cities, rather than lose, from the megaproject. We also demonstrate that the distribution of winners and losers from the megaproject depends on where the associated cost reductions occur in the existing network structures.