The private and public benefits of a new tram line in Florence

Nice Paper by Bank of Italy researchers:

Urban agglomerations, displaying the highest levels of productivity and growth, pose severe congestion problems. This issue can be mitigated by the construction of transport facilities enabling a higher centre-suburbs permeability. The returns from these infrastructures are, however, the subject of debate, especially in cities that have major artistic and urbanistic constraints. The purpose of this paper is to estimate the private and public benefits of a new tram line recently built in Florence. We apply the synthetic control method to metropolitan micro-zones in order to estimate the impact of the tram line on house prices in the suburbs located close to the stops. We also estimate a hedonic pricing model on individual bids downloaded from a popular real estate agency. The results, which are consistent for the two approaches, demonstrate that houses located close to the new tram network have registered a price increase of €200 to €300 per square meter, 7-10 per cent of the total value. The study also confirms the presence of public benefits related to the facility, in terms of accident reduction and improved air quality.

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