Abstract:

This paper investigates the impact of the largest infrastructure project in American history—the Interstate highway system—on inequality and the role of institutional segregation in its disparate incidence. To evaluate the distributional impacts, I develop a general equilibrium spatial framework that incorporates empirical estimates from disaggregated Census microdata in 1960 and 1970 for 25 cities. Highways generated substantial costs from local harms on adjacent areas as well as benefits from reductions in commute times. In the urban core, costs outweigh benefits as proximity to highways is greater and commute connectivity improves predominantly in remote suburbs. I find residential constraints account for much of the initial concentration of the Black population in central areas and their low mobility away, which contribute to racial rather than class gaps in impacts from the Interstate highway system. When barriers are eliminated and Black households are granted access beyond central neighborhoods, the gap in highway impacts is reduced while all groups experience large gains from interstate development. These results highlight how institutions shape inequality in the incidence of place-based shocks.

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