Spatial Misallocation, Informality, and Transit Improvements : Evidence from Mexico City
This paper proposes a new mechanism to explain resource misallocation in developing countries: the high commuting costs within cities that prevent workers from accessing formal employment. To test this mechanism, the paper combines a rich collectio...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099332303302232640/IDU04600b00f0f3e404c4f085520cd82c82a60a5 http://hdl.handle.net/10986/37274 |
| Summary: | This paper proposes a new mechanism
to explain resource misallocation in developing countries:
the high commuting costs within cities that prevent workers
from accessing formal employment. To test this mechanism,
the paper combines a rich collection of microdata and
exploits the opening of new subway lines in Mexico City. The
findings show that transit improvements reduce informality
by 7 percent in areas near the new stations. The paper
develops a spatial model that accounts for the direct
effects of infrastructure in perfectly economies and
allocative efficiency. Changes in allocative efficiency
driven by workers’ reallocation to the formal sector amplify
the gains by 20–25 percent. |
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