 Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural NicaraguaWyatt Brooks and Kevin Donovan Econometrica, 2020, vol. 88, issue 5, 1965-1997 Abstract: We measure the impact of increasing integration between rural villages and outside labor markets. Seasonal flash floods cause exogenous and unpredictable loss of market access. We study the impact of new bridges that eliminate this risk. Identification exploits variation in riverbank characteristics that preclude bridge construction in some villages, despite similar need. We collect detailed annual household surveys over three years, and weekly telephone followups to study contemporaneous effects of flooding. Floods decrease labor market income by 18 percent when no bridge is present. Bridges eliminate this effect. The indirect effects on labor market choice, farm investment, and savings are quantitatively important and consistent with the predictions of a general equilibrium model in which farm investment is risky, and households manage labor market risk and agricultural risk simultaneously. In the calibrated model, the increase in consumption‐equivalent welfare is substantially larger than the increase in income due to the ability to mitigate risk. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:88:y:2020:i:5:p:1965-1997 Ordering information: This journal article can be ordered from Access Statistics for this article Econometrica is currently edited by Guido W. Imbens More articles in Econometrica from Econometric Society Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.