Infrastructure maintenance and rural economic activity: Evidence from India

Ritam Chaurey and Duong Trung Le

Journal of Public Economics, 2022, vol. 214, issue C

Abstract: We evaluate the impact of a rural infrastructure development and maintenance scheme, directed towards India’s most “backward” districts. Importantly, these infrastructure grants were spent on maintenance, improvements, and complementary investments to existing infrastructure. Using a Regression Discontinuity Design and multiple data sets covering the entire firm size distribution, as well as household employment surveys, we show evidence on the effectiveness of the program on local economic activity. In treated districts, the policy appears to have increased overall village-level employment, and the number of microenterprises, but there were no changes for formal firms. These increases were likely driven by a decline in the share of agricultural wage workers. At the individual-level, wages and the number of days worked also increased. There is suggestive evidence that both rural electrification and connectivity were important mechanisms driving our results. We find stronger impacts in electricity and road-intensive industries, and in villages that had paved roads and electricity prior to the program. Overall, our paper suggests that improving rural infrastructure conditions can boost economic activity, especially by stimulating microenterprises.

Keywords: Infrastructure; Firms; India; Microenterprises; Regression Discontinuity Design (search for similar items in EconPapers)
JEL-codes: O12 O18 O25 R11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:214:y:2022:i:c:s004727272200127x

DOI: 10.1016/j.jpubeco.2022.104725

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