Road infrastructure and skill premium: Evidence from Indian manufacturing

Santanu Chatterjee, Thomas Lebesmuehlbacher and Abhinav Narayanan

Journal of Development Economics, 2025, vol. 174, issue C

Abstract: We investigate the impact of road infrastructure on labor markets in India’s manufacturing sector by using the variation in time spent by firms and households on completed sections of a major highway construction project. While the skill composition and overall employment remain unchanged, we find that the skill premium rises three years after the completion of a highway segment, primarily in larger firms that use transportation assets intensively. Labor market frictions significantly influence these outcomes: districts with higher skill mismatch or lower firm monopsony power see a more substantial increase in the skill premium after the completion of a highway segment.

Keywords: Infrastructure; Roads; Public investment; Golden Quadrilateral; Manufacturing; Skill premium; Monopsony; Capital-skill complementarity; Skill mismatch (search for similar items in EconPapers)
JEL-codes: E2 H4 H5 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:174:y:2025:i:c:s0304387824001573

DOI: 10.1016/j.jdeveco.2024.103408

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