Who gains from agglomeration? The wage, productivity, and cost effects of transport improvements on firms and workers

We study the impact of transport-induced agglomeration on worker earnings and establishment-level outcomes in the Helsinki region, Finland, using comprehensive administrative microdata. We are the first to jointly examine worker- and firm-level effects of agglomeration within a unified empirical framework. Using a multimodal workplace-to-workplace accessibility measure and exploiting transport network changes and establishment relocations for identification, we find that improved accessibility increases annual earnings: doubling accessibility raises wages by approximately 4.5 percent. The effects are driven entirely by localization economies, i.e., access to workplaces within the worker’s own industry, while urbanization economies have no significant wage effect. In contrast, we find no statistically significant impact of accessibility on value added per worker. Instead, improved accessibility increases establishment employment and raises other operating expenses per worker, consistent with higher rents. Doubling accessibility increases employment by 8.7 percent and other operating costs per worker by 6.1 percent. Taken together, our results suggest that the gains from transport-induced agglomeration accrue primarily to workers and property owners rather than being captured as higher firm-level productivity. These findings have direct implications for the evaluation of wider economic impacts in transport cost–benefit analysis.