Decisions on infrastructure investment exert powerful, long-term impacts on the built urban environment, and vice versa. Should governments subsidize highway construction or public transit? Is it preferable to invest in durable rail infrastructure or flexible bus systems? How will various infrastructure choices affect local residents and workers? Two chapters from the newly published book Infrastructure Economics and Policy: International Perspectives by the Lincoln Institute examine the links between infrastructure, urban physical form and urban productivity.
Chapter 4
In Chapter 4, Harvard economist Edward Glaeser focuses on how infrastructure technologies shape cities’ economic functions and physical layouts. Glaeser holds that a city’s density and form reflect the dominant transportation technologies prevalent during its rapid growth phase. For instance, Boston is far denser than Las Vegas largely because it expanded during the streetcar era rather than the automobile age. The full impacts of technological shifts unfold across three phases, a process that may take decades. The first phase covers the invention and iterative improvement of new mobility tools, including wagons, horse-drawn trams, electric streetcars, subways, automobiles and elevators. The second phase involves constructing urban transport networks to accommodate these vehicles. The third phase entails building entire cities around such networks.
Take the automobile as an example. Invented in the late 19th century, cars lacked comfort, reliability and affordability until the early decades of the 20th century, when their popularity surged. In response, the United States built extensive limited-access expressway systems across numerous cities. These highway networks in turn drove the spatial restructuring of American cities in the second half of the 20th century, shifting housing and workplaces to the suburbs and spurring population migration from northern cities to the Sun Belt.
Nevertheless, cities cannot be arbitrarily rebuilt around highways, subways and other transit networks due to the high value and long service life of existing residential and commercial buildings. For real estate developers to profit from demolishing suburban housing stock and constructing higher-density developments, commuting costs and travel times to central business districts must rise substantially. Local land use regulations can also slow land-use adjustments in response to transport technologies, especially rules that favor maintaining the status quo. As land use patterns lag behind transport innovations, cities may find it too late to adopt rational interventions once the full costs and benefits of the built environment become clear.
Glaeser also outlines two major common policy trade-offs regarding infrastructure and urban form.
First, should governments subsidize highways or public transit? Subsidies for highway construction and usage tend to fuel urban sprawl. Subsidizing public transit may encourage residents to live near transit stops and prompt developers to build housing alongside stations, yet empirical evidence shows this effect is far weaker than that of highway subsidies. In addition, strict local land-use controls in the United States limit housing developers’ capacity to respond to infrastructure investments, thereby restraining the potential benefits of such spending.
Second, cities face a choice between rail and bus systems for public transit, a trade-off between durability and flexibility. Bus services offer greater adaptability amid an uncertain future, while rail infrastructure’s permanence gives developers more confidence to build around stations. Public transit now faces a critical challenge: it constitutes a core component of any urban decarbonization strategy, yet passenger volumes worldwide have dropped sharply since the outbreak of the COVID-19 pandemic.
Chapter 5
Chapter 5 is authored by Daniel Graham, Daniel Hörcher and Roger Vickerman, all professors and researchers at Imperial College London. They explore the correlation between infrastructure and urban competitiveness. Urban agglomeration creates more job opportunities for workers and boosts corporate productivity, yet such agglomeration gains are accompanied by downsides including traffic congestion and pollution. Measuring agglomeration benefits poses significant methodological hurdles.
For analytical simplicity, the authors adopt a simplified urban model where residential and workplace locations are fixed, and infrastructure only affects worker productivity as well as congestion and pollution levels. Their core argument is that urban agglomeration generates both positive and negative externalities; failure to account for both simultaneously leads to flawed investment and pricing decisions. Positive externalities mainly stem from rising labor productivity as agglomeration scales up, alongside economies of scale in public transit provision. Negative externalities arise from increased traffic jams, pollution and road accidents.
The authors note substantial difficulties in empirically quantifying agglomeration benefits. Their measurements of how agglomeration scale impacts productivity have been endorsed by the UK government for mandatory cost-benefit analyses. In an extreme yet unlikely scenario where agglomeration gains and public transit economies of scale are extremely large while congestion externalities remain minimal, the net social benefits of peak-hour congestion charges for motorists would shrink drastically. All these factors must be weighed by cities when making infrastructure investment, pricing and subsidy decisions.
About the Authors
José A. Gómez-Ibáñez, Derek C. Bok Professor Emeritus of Urban Planning and Public Policy, Harvard University
Zhi Liu, Senior Fellow and Director of the China Program, Lincoln Institute of Land Policy
They serve as co-editors of Infrastructure Economics and Policy: International Perspectives.
