© 2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group Cities with more roads are more productive. However, it can be unclear whether roads increase productivity directly, through improved intra-urban connections, or indirectly, by attracting more people. Our theory suggests that population responses may obscure the direct connectivity effects of roads. Indeed, conditional on population size, highway density does not affect productivity in a sample of US metropolitan areas. However, when exploiting exogenous variation in urban populations, we find that highway density improves agglomeration benefits: moving from the 50th to the 75th percentile of highway density increases the productivity-to-population elasticity from 2% to 4%. Moreover, travel-based measures outperform population size as a measure of agglomeration externalities

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Developing and transitional countries devote considerable funds to selected areas to stimulate local growth and firm productivity. We examine the impact of place‐based interventions due to the opening of science parks in Shenzhen, China, on firm productivity and factor use. Our identification strategy, exploiting spatial and temporal differencing in firm‐level data, addresses the issues that (a) the selection of science park locations is not random and (b) high‐productivity firms sort themselves into science parks. Firm productivity is approximately 15–25% higher due to the science park policy. The policy also increases local wages and leads to distortions due to job displacement.