Do subways improve labor market outcomes for low-skilled workers?

Abstract

This paper evaluates the labor market effects of subway systems on low-skilled workers. A simple model of labor supply predicts that access to subway services can decrease transportation costs and improve labor force participation, but has ambiguous effects on the intensive margin of labor market outcomes. Empirical estimates from US cities show that a 10% expansion in subway miles increases the labor force participation of low-skilled individuals without a car by eight percentage points. However, subway expansions have no significant effect on the labor force participation of low-skilled individuals who own automobiles or on high-skilled workers. In contrast, expansions of light rails and buses have no significant effect on the labor market outcomes of low-skilled individuals. Improved subway services do not affect wages, hours worked, and commuting times, suggesting that the labor market benefits of subways mainly lie in the extensive margin of labor supply.