Optimal Investments in Africa’s Road Network

Sebastian Martin Krantz

No 10893, Policy Research Working Paper Series from The World Bank

Abstract: This paper characterizes economically optimal investments in Africa's road network––based on a detailed topography of the network, road construction costs, frictions in cross-border trading, and economic geography. Drawing on 144 million trans-continental routes, it first assesses local network efficiency and market access (MA). It then derives an optimal network graph connecting 447 cities and 52 ports, elicits MA-maximizing investments, and conducts cost-benefit analysis. Using a spatial economic model and global optimization over the space of networks, it finally computes welfare-maximizing investments in spatial equilibrium for different budgets and parameters. These two frameworks are then applied to evaluate the economic optimality of the African Union's Programme for Infrastructure Development in Africa (PIDA). Findings imply that cross-border frictions and trade elasticities significantly shape optimal road network investments. Reducing frictions yields the greatest benefits, followed by road upgrades and new construction. Sequencing matters, as reduced frictions generally increase investment returns. Planned PIDA road projects are partially well-targeted but overall sub-optimal, leaving roughly half of the achievable MA gains unrealized.

Date: 2024-09-04
New Economics Papers: this item is included in nep-net, nep-tre and nep-ure
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