Spending on transport infrastructure can improve households’ income significantly, which may be transformed ultimately into higher tax revenue and GDP growth.
 
We determine the impacts of improvement and modernization of transport infrastructure on households’ income. We analyzed the impacts of a rapid transit system in urban areas of Punjab Province, Pakistan. We have compared the effects of this program in Punjab (treated group) with the other provinces (controlled groups). We applied the data from the “Households Income and Expenditure Survey (HIES)” for seven years across eight administrative regions. The “panel least square” model was constructed for this comparison and a “difference-in-difference approach was followed. The total number of households included in the data is 120,048, of which 45,952 belong to urban areas. The empirical results show a significant improvement in households’ income after improvement in transport infrastructure. This improvement and modernization of the transport infrastructure in urban areas of Punjab Province has increased households’ income by more than 14% of the mean income compounded annually. These results are consistent and robust in various alternative scenarios. We present a very strong justification in favor of spending on transport infrastructure, as it is envisaged that spending on transport infrastructure can improve households’ income significantly, which may be transformed ultimately into higher tax revenue and GDP growth. We recommend investing in transport infrastructure to improve households’ income because it may provide more connectivity and speedy access for workers to their workplaces. This phenomenon is confirmed by a significant increase in household incomes in those urban areas of Pakistan where the transport system has been improved.