Does traffic congestion influence the location of new business establishments? An analysis of the San Francisco Bay Area

Abstract

Chronic traffic congestion is widely assumed to negatively affect regional economic performance, but this assumption has been only lightly tested. We examine the traffic congestion–economic performance link using data for the San Francisco Bay Area and find that the effect of traffic on the regional economy may be both less significant and more nuanced than is widely assumed. Our analysis examines how traffic congestion affects the location of new business establishments in six industries: advertising, biotechnology, computer systems design, information technology manufacturing, securities, and, as a control, groceries & supermarkets. New business establishments are a key driver of economic performance because they account for the majority of job creation in the USA. We find little evidence that traffic levels affect the location of new establishments in the Bay Area, and when we do observe an effect it is a positive one; that is, after controlling for a wide array of factors known to influence firm location, new firms are often more likely to start up in already congested areas. This does not mean that traffic congestion attracts new firms, but instead that the access advantages new firms accrue from clustering near same-industry firms strongly outweigh the added impedance of traffic congestion in these built-up areas of agglomeration.

Forecasting Electricity Load Demand- An Power System Planning

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Measuring the Regional Economic Impact of Transportation Access Improvements in the Context of a Large Metropolitan Region

“…Further supporting this concern is the observation that multiple activity centers develop as a metropolitan area, and its economy grows as a way to access the market agglomeration economies of a metropolitan labor pool while avoiding the agglomeration diseconomies of rising congestion and land prices in the urban core ( 16 , 17 ). This point reinforces the need for metropolitan transportation agencies to consider transportation project impacts on population and workforce connectivity in addition to the impacts on business connectivity ( 18 ).…”

Traffic congestion and economic context: changes of spatiotemporal patterns of traffic travel times during crisis and post-crisis periods

“…Precisely, agglomeration trends and localisation economy theory are very relevant for understanding congestion and economic growth links. By focusing on firms’ location, certain studies have found that new firms prioritise being located near same-industry firms because the access advantages of these areas of agglomeration outweigh the impedances of traffic congestion (Osman et al 2019 ). However, some differences are found depending on the scale of congestion and the sector: as mentioned before, while localised congestion may be a proxy for amenities valued by many firms, regional congestion may be detrimental (Sweet 2014b ), especially to office-based firms (Hou 2016 ).…”

“…Besides the differing impacts of congestion on economic growth, most studies agree on the relevance of household income and employment as key variables in congestion analyses (Jin and Rafferty 2017 ; Mondschein and Taylor 2017 ; Osman et al 2019 ; Thomas et al 2018 ). However, to measure and evaluate individuals’ exposure to congestion properly, consideration must be given not only to commuting (employment/jobs access) but also to the whole activity-travel pattern of individuals and households (Kim and Kwan 2019 ).…”