Does traffic congestion reduce employment growth?

This paper examines the impact of traffic congestion on employment growth in large U.S. metropolitan areas. An historic highway plan and political variables serve as instruments for endogenous congestion. The results show that high initial levels of congestion dampen subsequent employment growth. This finding suggests that increasing the efficiency of public infrastructure can spur local economies. Counterfactual estimates show that the employment-growth returns from modest capacity expansion or congestion pricing are substantial.