Open for Business? Effects of Los Angeles Metro Rail Construction on Adjacent Businesses

Abstract

Recent court cases and news reports have focused on the effects of transit construction on business revenue and survival, yet the topic is underexplored in the scholarly literature. This paper examines whether transit construction negatively affected the revenue and survival of businesses along the second segment of the Los Angeles Metro Rail Red Line under Vermont and Hollywood Boulevards. Using National Establishment Time-Series business data, the research shows that business survival was significantly lower among businesses within 400 meters of stations, where cut and cover construction was used. A difference-in-differences technique was employed to determine whether revenue loss was the main mechanism by which businesses were displaced, but revenue loss was not found to be significant. The increased failure rate provides evidence that construction effects of mitigation programs for businesses should be standard practice when building new transit lines. Further research and data collection on business tenure are needed to understand the dynamics of business displacement around transit and to make such programs more effective.