Road Capacity, Domestic Trade and Regional Outcomes

Banu Demir, Kerem Cosar, Devaki Ghose and Nathaniel Young

No 16512, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 percent 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: 2021-09
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Working Paper: Road Capacity, Domestic Trade and Regional Outcomes (2021)
Working Paper: Road Capacity, Domestic Trade and Regional Outcomes (2021)
Working Paper: Road Capacity, Domestic Trade and Regional Outcomes (2021)
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