The Long-Run Effects of Interstate Highways on Rural America

This paper estimates how interstate highway construction affected the adult outcomes of individuals born into rural America using longitudinally linked microdata. While aggregate cross-sectional studies find mixed effects of highways on rural economies, we reveal substantial person-based benefits that persist even when individuals migrate. By instrumenting highway construction with the 1947 federal highway plan, our estimates identify highway impacts on persons born into rural America by comparing birth counties which happened to fall between metropolitan transportation hubs on the planned highway grid to those that did not. Using Social Security records linked to Census data for cohorts born 1935-1955, we find that highways benefited those born into rural America, increasing income by 4.4% ($1,960), reducing unemployment by 5%, and raising college completion by 8%. Highways also shifted the industrial composition of rural Americans from agriculture to services and enabled strategic out-migration to urban and highway corridors. Further heterogeneity analysis by industry and migration choice show evidence that agricultural workers benefited by out-migration, while non-agricultural workers gained from improved local labor markets. Importantly, benefits accrued to both those who stayed and those who migrated out, suggesting highways improved local opportunities in addition to facilitating migration to opportunities. Comparison with cross-sectional data suggests that a substantial portion of county-level income gains reflect direct benefits to rural-born individuals. These findings demonstrate that infrastructure investments generate lasting labor market and human capital gains, which were not visible in conventional cross-sectional analyses.