Road capacity, domestic trade and regional outcomes

Trade and the topography of the spatial economy

A Kerem Coşar, Banu Demir, Devaki Ghose and Nathaniel Young

Journal of Economic Geography, 2022, vol. 22, issue 5, 901-929

Abstract: What is the impact on intra-national trade and regional economic outcomes when the quality and lane-capacity of an existing paved road network is expanded significantly? We investigate this question for the case of Turkey, which undertook a large-scale public investment in roads during the 2000s. Using spatially disaggregated data on road upgrades and domestic transactions, we estimate a large positive impact of reduced travel times on trade as well as local manufacturing employment and wages. A quantitative exercise using a workhorse model of spatial equilibrium implies heterogeneous effects across locations, with aggregate real income gains reaching 2–3% in the long-run. Reductions in travel times increased local employment-to-population ratio but had no effect on local population. We extend the model by endogenizing the labor supply decision to capture this finding. The model-implied elasticity of employment rates to travel time reductions captures about one-third of the empirical elasticity.

Keywords: Trade; market access; transportation infrastructure (search for similar items in EconPapers)
JEL-codes: F14 R11 R41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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