This paper presents theoretical explanations about the spill-over effects of domestic production of light rail transit and empirically investigates its effects on output, value-added and employment in the Korean economy. We distinguish net gains of domestic production from gross effects that bring about whether localized or imported cars are used. The input-output analysis is employed to fully capture the interaction among various industries involved. The empirical results reveal that net gains of domestic production such as import substitution, improvement of trade balances, and increase in output, value-added and employment are enormous. The cost reduction in construction, E&M systems, cars, management, and tariff and transportation is also significant.