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Gains from market integration: Welfare effects of new rural roads in Ethiopia

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  • Kebede, Hundanol A.

Abstract

This paper estimates the welfare gains from the construction of rural roads that connect agricultural villages to market centers. I take theoretical predictions from Ricardian trade models to a rich high spatial resolution micro data on agricultural production from Ethiopia, which coincides with a period of extensive rural road construction. I estimate that the road construction resulted in an approximately 13% increase in real agricultural income, on average, and show that this increase is attributed to the mechanisms suggested in the Ricardian trade model: the prices of villages’ comparative advantage crops increased, and villages reallocated land for these crops following decreases in trade costs.

Suggested Citation

  • Kebede, Hundanol A., 2024. "Gains from market integration: Welfare effects of new rural roads in Ethiopia," Journal of Development Economics, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:deveco:v:168:y:2024:i:c:s0304387824000014
    DOI: 10.1016/j.jdeveco.2024.103252
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    More about this item

    Keywords

    Market integration; Ricardian trade models; Rural roads; Trade costs; URRAP;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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