An Empirical Analysis of the Benefits of Opening a Highway in Terms of Changes in Housing Prices

Abstract

This study empirically analyzes the social benefits of opening a highway by assessing the increase in housing prices in two surrounding regions: one defined as the treatment group and the other defined as the control group. Although the two regions are geographically adjacent, they belong to different administrative districts and are physically separated by natural topographical features such as mountain ranges. Both aspects make it so that the interaction or influence between the two regions is limited, which raises the probability that the control group will show a trend similar to that of the treatment group under the influence of economic factors but will not be affected by the opening of the highway. With this in mind, the benefits of accessibility improvement due to the opening of the highway are estimated by using the difference-in-differences framework, i.e., the relative change in housing prices in the treatment group compared to the control group. In addition, the corresponding highway route is analyzed by dividing it into three sections according to their opening times and locations. The findings suggest that the estimated benefits are not fictional but robust. The increase in housing prices due to the opening of a highway is estimated to be, on average, 586 to 3075 dollars per apartment (equivalently, USD 10 to 53 per square meter). These benefits are worthy of being reflected upon, complementary to a traditional cost-benefit analysis.