New re­search: How the Great Belt Bridge changed the Dan­ish eco­nomy

When the Great Belt Bridge opened in 1998, it was celebrated as a milestone in Danish infrastructure. East and West were connected, travel times were reduced, and Denmark suddenly felt a little smaller. But what has the bridge actually meant for the Danish economy – for companies and employees?

That is one of the questions economist Ismir Mulalic from CBS, together with two colleagues, seeks to answer in a new research article published in Regional Science and Urban Economics.

And their data-based conclusion is clear: the Great Belt Bridge has led to an annual productivity increase of 0.22 percent, corresponding to roughly DKK 6 billion per year.

”It is quite a significant figure and shows that the bridge has been a sound investment,” says Ismir Mulalic. He emphasises that he and his colleagues focus solely on the socioeconomic consequences of the bridge, while discussions about user fees are left to politicians.

Gains with inequalities

The researchers made use of the fact that the Great Belt Bridge represented what economists call an exogenous shock – a sudden, external change in infrastructure – to measure the effects on productivity and wages. By comparing municipalities that experienced major improvements in accessibility with those that did not, they could isolate the bridge’s economic impact.

“Usually, it is difficult to obtain sufficient data, but in this case it worked well because Denmark probably has some of the best data in the world. It therefore made sense to explore the economic consequences, especially since the fixed link across the Great Belt had been debated for years before construction began – and many questioned whether it would ever pay off,” explains Ismir Mulalic.

The productivity increase observed after the bridge’s completion is mainly due to companies gaining access to a larger pool of labour, as commuting became easier. At the same time, companies were able to expand their customer base since they could now cover a larger geographical area within a single working day.
However, since the 0.22 percent annual productivity increase represents a national average, the benefits have not been distributed evenly.

Better job matching has boosted productivity

“The effects have primarily been felt in Greater Copenhagen and, to a lesser extent, in Odense. The reason why major cities benefit the most is that they are already accustomed to competition. With the opening of the Great Belt Bridge, we introduced a new competitive landscape where the conditions for doing business changed,” says the CBS researcher.

“And Copenhagen has traditionally been well positioned in that respect – companies there are used to competing both for highly educated employees and for new contracts. In contrast, smaller towns have fewer businesses and therefore less competition,” he adds.

In their study, the researchers use the term matching effect. As travel times decrease and the number of commuters rises, it becomes easier for companies and employees to find each other. This leads to better job matches – and consequently higher productivity.

However, smaller towns in western Zealand and on Funen have not benefitted to the same extent.

Highly educated men have gained the most

While companies have benefitted from better labour matches, the wage effects for employees have been modest.

“The likely explanation is that many commuters felt compensated by the time saved from shorter travel distances. We can see that the wage gains primarily apply to highly educated men in more specialised jobs. Previous research shows that women are generally less willing to commute long distances. It is therefore likely that many have chosen not to pursue higher wages if it meant significantly longer travel times,” says Ismir Mulalic and sums up:

“Our research shows that the Great Belt Bridge has been a good investment overall – but it has also amplified existing inequalities between regions and between men and women.”

Economically, companies have benefitted more from the Great Belt Bridge than employees. Greater Copenhagen and, to some extent, Odense have gained more than the rest of Denmark. Among commuters, highly educated men have seen the greatest wage increases.