Take the Q Train: Value Capture of Public Infrastructure Projects / Arpit Gupta, Stijn Van Nieuwerburgh, Constantine Kontokosta.

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Gupta, Arpit

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26789.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Transit infrastructure is a critical asset for economic activity yet costly to build in dense urban environments. We measure the benefit of the Second Avenue Subway extension in New York City, the most expensive urban transit infrastructure project in recent memory, by analyzing local real estate prices which capitalize the benefits of transit spillovers. We find 8% price increases, creating $6 billion in new property value. Using cell phone ping data, we document substantial reductions in commuting time especially among subway users, offering a plausible mechanism for the price gains. The increase in prices reflects both higher rents and lower risk. Infrastructure improvements lower the riskiness of real estate investments. Only 30% of the private value created by the subway is captured through higher property tax revenue, and is insufficient to cover the cost of the subway. Targeted property tax increases may help governments capture more of the value created, and serve as a useful funding tool.

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Working Paper	Biblioteca Digital	Colección NBER	nber w26789 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w26786 Between Firm Changes in Earnings Inequality: The Dominant Role of Industry Effects /	nber w26787 Does Student Loan Forgiveness Drive Disability Application? /	nber w26788 Across-Country Wage Compression in Multinationals /	nber w26789 Take the Q Train: Value Capture of Public Infrastructure Projects /	nber w2679 Foreign Exchange Rate Expectations: Micro Survey Data /	nber w26790 How do U.S. Visa Policies Affect Unauthorized Immigration? /	nber w26791 21st Century Macro /	Next

February 2020.

Transit infrastructure is a critical asset for economic activity yet costly to build in dense urban environments. We measure the benefit of the Second Avenue Subway extension in New York City, the most expensive urban transit infrastructure project in recent memory, by analyzing local real estate prices which capitalize the benefits of transit spillovers. We find 8% price increases, creating $6 billion in new property value. Using cell phone ping data, we document substantial reductions in commuting time especially among subway users, offering a plausible mechanism for the price gains. The increase in prices reflects both higher rents and lower risk. Infrastructure improvements lower the riskiness of real estate investments. Only 30% of the private value created by the subway is captured through higher property tax revenue, and is insufficient to cover the cost of the subway. Targeted property tax increases may help governments capture more of the value created, and serve as a useful funding tool.