Gains from market integration: Welfare effects of new rural roads in Ethiopia

Hundanol Kebede

Journal of Development Economics, 2024, vol. 168, issue C

Abstract: This paper estimates the welfare gains from the construction of rural roads that connect agricultural villages to market centers. I take theoretical predictions from Ricardian trade models to a rich high spatial resolution micro data on agricultural production from Ethiopia, which coincides with a period of extensive rural road construction. I estimate that the road construction resulted in an approximately 13% increase in real agricultural income, on average, and show that this increase is attributed to the mechanisms suggested in the Ricardian trade model: the prices of villages’ comparative advantage crops increased, and villages reallocated land for these crops following decreases in trade costs.

Keywords: Market integration; Ricardian trade models; Rural roads; Trade costs; URRAP (search for similar items in EconPapers)
JEL-codes: F14 H54 O12 O13 O18 Q12 R12 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:168:y:2024:i:c:s0304387824000014

DOI: 10.1016/j.jdeveco.2024.103252

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