Independent businesses struggle to survive highway improvement projects

By Aaron Westling

While past research has explored the impacts that new, large-scale highway construction projects have on local businesses, a recent study investigated the effects of smaller improvement projects, such as repaving and bridge replacements, and who tends to benefit from such improvements. The study found these types of projects are more common in higher-income neighborhoods, but that local, non-chain businesses were most likely to be negatively impacted by ongoing construction and altered traffic patterns compared to nearby multi-location, chain businesses.  

Published in August 2023, The Effects of Highway Improvement Projects on Nearby Business Activity, was sponsored by the Minnesota Department of Transportation and authored by Yingling Fan and Noah Wexler of the Humphrey School of Public Affairs at the University of Minnesota. The researchers used highway construction information from MnDOT, business survey responses from InfoUSA, and census data to establish both the demographic factors that contribute to highway improvement prioritization and the impacts of those improvements on businesses in the Twin Cities’ commercial corridors. These findings are intended to help MnDOT better understand the impacts of highway improvement projects and support the agency’s goal of more equitable planning and project selection.  

The researchers generally found few significant economic impacts (based on sales, employment, establishment counts, and turnover), but were able to provide some insight into the effects of Minnesota’s current highway improvement strategy. The study found that higher income census tracts were more likely to get the investments. Specifically, a 100% increase in per capita income increased the probability of highway improvement by about 22 percentage points, while a 100% increase in median rent increased the probability of treatment by 25 percentage points. Additionally, the study found that independent businesses were more likely to be negatively impacted by improvement projects. They explain:  

“Specifically, we find that single-establishment firms experience negative sales effects from construction when tracts are affected only by infrastructure replacement projects (improvements that do not affect traffic operations, i.e., a bridge replacement). Furthermore, negative sales and employment effects occur after construction is completed for single-establishment firms in urban areas and in tracts affected by longer bouts of construction.” 

Additionally, non-chain establishments weren’t as likely to take advantage of improved traffic conditions that resulted from the construction: “there is business count growth and less closure among establishments owned by multiple-location firms after traffic operations are improved, meaning that multiple-location firms may opt to take advantage of improved traffic flow by retaining and adding businesses around more highly trafficked areas.”  

In a previous study, the researchers found similar results for disruptions caused by major rail projects in the Twin Cities region, except for along the Blue Line where both independent and chain businesses saw sales increase about 40% over 16 years.  

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