Survival of small firms after new transit lines: Evidence from Seoul

Abstract

We examined the impact of a new subway line on the closing rates of small businesses in Seoul, focusing on the changes in business survival rates before and after the opening of subway line 9. We obtained individual business license data that contain information on the geographic coordinates, opening and closing dates, and business types, and then selected subsamples located within 500 m from the subway stations. To identify the causal relationship between a new transit line and the survival rates of small businesses, we adopted difference-in-differences models combined with the Cox proportional hazards regression model. Empirical results indicate that the opening of the subway network does not have a statistically significant impact on firms located near subway stations. However, heterogeneous effects were observed depending on the type of firm and its proximity to the stations. Coffee shops are one of the business types most likely to turn over near new subway stations. Results also show that the impact of opening the new transit line varies by business type and distance to the subway station. Specifically, among the businesses, restaurants within 250-500 m from the station have higher survival rates (12.72 %), while non-restaurants within 250 m from the station have lower survival rates (10.87 %) after the opening of the new subway line compared to those in control areas.