The underground economy: Tracking the higher-order economic impacts of the São Paulo Subway System Eduardo A. Haddad a,⇑ , Geoffrey J.D. Hewings b , Alexandre A. Porsse c , Eveline S. Van Leeuwen d , Renato S. Vieira a a University of São Paulo, Brazil b University of Illinois, USA c Federal University of Parana, Brazil d VU University Amsterdam, The Netherlands article info Article history: Received 15 August 2013 Received in revised form 17 December 2014 Accepted 23 December 2014 Available online 28 January 2015 Keywords: Mobility Accessibility Productivity Economy-wide effects Transportation infrastructure Subway system abstract Over one million workers commute daily to São Paulo City center, using different modes of transportation. The São Paulo subway network reaches 74.2 km of length and is involved in around 20% of the commuting trips by public transportation, enhancing mobility and pro- ductivity of workers. This paper uses an integrated framework to assess the higher-order economic impacts of the existing underground metro infrastructure. We consider links between mobility, accessibility and labor productivity in the context of a detailed metro- politan system embedded in the national economy. Simulation results from a spatial com- putable general equilibrium model integrated to a transportation model suggest positive economic impacts that go beyond the city limits. While 32% of the impacts accrue to the city of São Paulo, the remaining 68% benefit other municipalities in the metropolitan area (11%), in the State of São Paulo (12.0%) and in the rest of the country (45%). Ó 2015 Elsevier Ltd. All rights reserved. 1. Introduction In 1989 Aschauer asked the question: ‘‘Is public expenditure productive?’’ In the last several decades, a great deal of research has focused on the measurement of the impact of public investment including analyses that have attempted to identify the main channels through which public capital may affect growth: a direct productivity and cost effect of infra- structure, a complementarity effect on private capital, and possible crowding out effects on private investment (Agénor, 2012). In large metropolitan areas, the provision of public infrastructure (and increasingly its maintenance) has become a source of intense debate, especially in an era of declining fiscal resource and limited appetite on the part of the general public for increased taxes. Increasingly, cost–benefit analysis (CBA) is used as a tool by national and local policymakers to appraise and evaluate large infrastructure projects (Vickerman, 2000). However, although this tool suggests a simple comparison between costs and benefits, in reality this is not so simple (see Mackie and Preston, 1998). Part of the problem comes from imperfections in measurement of the productivity enhancements that are derived from public infrastructure. In many cases, only partial equilibrium estimates have been made, discounting the full, economy-wide http://dx.doi.org/10.1016/j.tra.2014.12.011 0965-8564/Ó 2015 Elsevier Ltd. All rights reserved. ⇑ Corresponding author. Address: Department of Economics at the University of Sao Paulo, Brazil and NEREUS – The University of Sao Paulo Regional and Urban Economics Lab, Av. Prof. Luciano Gualberto, 908, FEA I, 05508-900 Cidade Universitária, São Paulo, SP, Brazil. E-mail address: ehaddad@usp.br (E.A. Haddad). Transportation Research Part A 73 (2015) 18–30 Contents lists available at ScienceDirect Transportation Research Part A journal homepage: www.elsevier.com/locate/tra