Economic impact of a supply change in mass transit in urban areas: A Canadian example

This paper aims at estimating the economic impact of a supply change in the bus transit service in a Canadian city of medium size. By using a quasi-experiment approach and a difference-in-differences (DID) estimator, it evaluates the impact of the introduction of a rapid bus transit (RBT) in Quebec City (Canada) through a spatio-temporal analysis of house price variations. The hedonic price model shows that the new service generates an increase in house price ranging from 6.9% to 2.9%, for those properties located close to the service corridor where the population is quite dense and where the service was offered initially. Using sales transaction data and municipal assessment records from 1997, the effect on price is translated into an economic impact for the whole region. The paper shows that the improvement in public transit supply generates, for Quebec City, a significant fiscal impact estimated to $6 M and a plus-value for properties owners close to $35 M over 12 years. Finally, the implications of this kind of analysis for urban planning and development are discussed.

Research highlights
► The RBT service introduce in Quebec City in 1992 generates an increase in house price ranging from 6.9% to 2.9%, for those properties located close to the service corridor where the population is quite dense and where the service was offered initially.
► The improvement in public transit supply generates, for Quebec City, a significant fiscal impact estimated to $6 M and a plus-value for properties owners close to $35 M over 12 years (in 2004 value).
► The partial economic impact estimated is higher than the investment required ($8.8 M in 2004 value) for the supply change in mass transit (regular bus to RBT).