Does subway proximity discourage automobility? Evidence from Beijing

Many cities around the world are investing in rail transit, but whether it can effectively reduce road congestion and air pollution from automobiles remains an open question. A major challenge to empirically answering this question is the fact that the choices of residential location and travel mode are jointly made by households. The unique context of urban housing in Beijing provides us a natural experiment to separate residential location and travel choices of households living in the resettlement and reformed housing units. We take advantage of the largely exogenous residential locations of those living in the resettlement and reformed housing in Beijing and use the Heckman two-step method to correct a potential bias in estimating vehicle fuel consumption. To identify the heterogeneous effects of different subway stations, we use the travel time to city center by subway to proxy a subway station's value to users. We find robust evidence supporting that subway proximity reduces a household's probability of owning a car and subsequent fuel consumption. More valuable subway stations discourage nearby households’ car ownership rate by a greater extent. Evidence does suggest the existence of residential self-selection.