Title: Expecting an Expressway.
Abstract:
We provide theory and evidence on the role of self-fulfilling expectations in determining urban spatial structure. In U.S. central cities, highways had net negative local effects on neighborhoods by reducing quality of life. Highway builders enjoyed widespread support and few constraints as they planned urban Interstates in the mid-1950s. But federal and state reforms led to the cancellation of some highway projects and their dependent segments, especially after 1973. Planned—but never constructed—urban Interstate segments caused neighborhood declines through 1970, and these declines persisted for decades afterwards, despite plan cancellation. These results are consistent with forward-looking behavior and strong externalities in residential location choice.