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The construction of highway bypasses has resulted in many economic benefits both for intercity motorists as well as residents of towns with bypasses. Despite the benefits of bypasses, they remain controversial. Local business owners in the town being bypassed fear that the reduction of traffic passing through the town will adversely affect their sales. The purpose of this study is to add to the literature concerning the economic impact of highway bypasses on small towns. The measured impacts are (1) total employment of bypass towns, (2) retail sales of the towns' travel-related businesses, (3) employment of the towns' travel-related businesses, and (4) the bypass town as a whole. To measure the impact of the bypasses on total employment of bypass towns, each of the nine sample towns was matched with a group of control towns. Total employment of each bypass town was regressed on total employment of its control towns and a bypass dummy variable used to measure the effect of the bypass. The equations were estimated by ordinary least squares (OLS) regression. The other three impacts were obtained by interviewing the owners and managers of 54 travel-related businesses located in the nine bypass towns. The statistical results are consistent with the hypothesis that the bypass did not have a statistically significant effect on total employment of the bypass towns. In the opinion of most of the owners and managers of the travel-related businesses the bypasses had a negative impact on their retail sales and employment, and on the town as a whole. There was a substantial variation in opinion regarding the impact of the bypass on company retail sales, and employment, and on the town as a whole among the industry groups in the sample.


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