On track towards improved regional development? – Impacts of the Svealand rail line on labour earnings in the Mälaren region

Abstract

This paper studies the impacts on productivity following an investment in regional high-speed rail in the Mälaren region in Sweden. It uses wage earnings as a measure of productivity and proposes to capture agglomeration effects by measuring changes in effective labour force density induced by the transport improvement across municipalities in the region. This change in effective labour force density is then used as a continuous measure of treatment, in order to estimate the effect of the Svealand line introduction on labour earnings. While the transport improvement had a large impact on the connectivity and commuting patterns in affected municipalities, we find estimates of wage elasticities with respect to agglomeration that are in line with or smaller than average values from previous literature. The productivity effects, estimated over a ten-year time period, are shown to be rather modest and concentrated to the regions whose connectivity to the greater Stockholm area was directly affected. We also find that the main results do not materialize when a much shorter time period is used for analysis, indicating that a rather long adjustment time needs to occur before any effects can be seen.