Roads, internal migration and the spatial sorting of U.S. high-skill workers

Abstract

This article studies the effects of a major transport infrastructure project, the construction of the U.S. Interstate Highway System (IHS), on the location choices and welfare of high-skill and low-skill workers. In its first part, the article provides reduced-form evidence that the IHS altered the skill composition of metropolitan areas. Event study and instrumental variable regressions show that better-connected cities experienced higher growth in their adult population and share of college-educated residents. Additional results highlight the role played by lower travel times, inter-state migration, and agglomeration economies. The second part of the article rationalizes these patterns using a quantitative spatial model with costly trade, heterogeneous migration costs, and agglomeration economies. Counterfactual experiments show that increasing travel times to their pre-IHS values would lower the expected utility of high-skill workers by an average of 6.1% and that of low-skill workers by 6.4%. These effects exhibit significant variation across cities and, within cities, across skill groups. The findings in this article highlight how transport infrastructure shapes the distribution of skills and the spatial patterns of welfare inequality.