IDEAS home Printed from https://ideas.repec.org/p/cdl/agrebk/qt8mg7z5kt.html
   My bibliography  Save this paper

Road Maintenance and Local Economic Development: Evidence from Indonesia's Highways

Author

Listed:
  • Gertler, Paul J
  • Gonzalez-Navarro, Marco
  • Gracner, Tadeja
  • Rothenberg, Alexander

Abstract

This paper estimates the local welfare impacts of highway maintenance investments. We instrument road quality exploiting IndonesiaÕs two-step budgeting process for allocating funding to local road authorities. Using comprehensive data on road quality from 1990à 2007, we find evidence that better roads help manufacturers create new jobs, enabling worker transitions out of informal employment, and increasing labor income. Road quality also changes the cost of living, reducing perishable food prices but also raising housing prices. We estimate the elasticity of household welfare with respect to road quality to be 0.09 and the benefit/cost ratio for road maintenance investments to be 1.8.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gertler, Paul J & Gonzalez-Navarro, Marco & Gracner, Tadeja & Rothenberg, Alexander, 2022. "Road Maintenance and Local Economic Development: Evidence from Indonesia's Highways," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8mg7z5kt, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt8mg7z5kt
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/8mg7z5kt.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
    2. Margaret Bock & Alexander Cardazzi & Brad R. Humphreys, 2021. "Where the Rubber Meets the Road: Pavement Damage Reduces Traffic Safety and Speed," NBER Working Papers 29176, National Bureau of Economic Research, Inc.
    3. Yoav Benjamini & Abba M. Krieger & Daniel Yekutieli, 2006. "Adaptive linear step-up procedures that control the false discovery rate," Biometrika, Biometrika Trust, vol. 93(3), pages 491-507, September.
    4. Foster,Vivien & Rana,Anshul & Gorgulu,Nisan, 2022. "Understanding Public Spending Trends for Infrastructure in Developing Countries," Policy Research Working Paper Series 9903, The World Bank.
    5. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
    6. Dennis Egger & Johannes Haushofer & Edward Miguel & Paul Niehaus & Michael Walker, 2022. "General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya," Econometrica, Econometric Society, vol. 90(6), pages 2603-2643, November.
    7. Margherita Comola & Luiz De Mello, 2011. "How Does Decentralized Minimum Wage Setting Affect Employment And Informality? The Case Of Indonesia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 79-99, May.
    8. Dave Donaldson, 2018. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," American Economic Review, American Economic Association, vol. 108(4-5), pages 899-934, April.
    9. Sylvain Leduc & Daniel Wilson, 2013. "Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 89-142.
    10. James G. MacKinnon & Matthew D. Webb, 2018. "The wild bootstrap for few (treated) clusters," Econometrics Journal, Royal Economic Society, vol. 21(2), pages 114-135, June.
    11. Samuel Bazzi & Matthew Gudgeon, 2021. "The Political Boundaries of Ethnic Divisions," American Economic Journal: Applied Economics, American Economic Association, vol. 13(1), pages 235-266, January.
    12. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    13. David Atkin & Benjamin Faber & Marco Gonzalez-Navarro, 2018. "Retail Globalization and Household Welfare: Evidence from Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 1-73.
    14. Howard Dick, 2000. "Representations of Development in 19th and 20th Century indonesia: A Transport History Perspective," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(1), pages 185-207.
    15. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    16. Marco Gonzalez-Navarro & Climent Quintana-Domeque, 2016. "Paving Streets for the Poor: Experimental Analysis of Infrastructure Effects," The Review of Economics and Statistics, MIT Press, vol. 98(2), pages 254-267, May.
    17. Sylvain Leduc & Daniel Wilson, 2014. "Infrastructure Spending as Fiscal Stimulus: Assessing the Evidence," Review of Economics and Institutions, Università di Perugia, vol. 5(1).
    18. Bird, Julia & Straub, Stéphane, 2020. "The Brasília experiment: The heterogeneous impact of road access on spatial development in Brazil," World Development, Elsevier, vol. 127(C).
    19. Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A "Market Access" Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(2), pages 799-858.
    20. Guy Michaels, 2008. "The Effect of Trade on the Demand for Skill: Evidence from the Interstate Highway System," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 683-701, November.
    21. Paul Collier & Martina Kirchberger & Måns Söderbom, 2016. "The Cost of Road Infrastructure in Low- and Middle-Income Countries," The World Bank Economic Review, World Bank, vol. 30(3), pages 522-548.
    22. George Fane, 2003. "Change And Continuity In Indonesia'S New Fiscal Decentralisation Arrangements," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 39(2), pages 159-176.
    23. Mr. Ehtisham Ahmad & Mr. Ali M. Mansoor, 2002. "Indonesia: Managing Decentralization," IMF Working Papers 2002/136, International Monetary Fund.
    24. Robin Burgess & Remi Jedwab & Edward Miguel & Ameet Morjaria & Gerard Padró i Miquel, 2015. "The Value of Democracy: Evidence from Road Building in Kenya," American Economic Review, American Economic Association, vol. 105(6), pages 1817-1851, June.
    25. Bryan, Gharad & Morten, Melanie, 2019. "The aggregate productivity effects of internal migration: evidence from Indonesia," LSE Research Online Documents on Economics 88177, London School of Economics and Political Science, LSE Library.
    26. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    27. Jonathan Temple, 2005. "Dual Economy Models: A Primer For Growth Economists," Manchester School, University of Manchester, vol. 73(4), pages 435-478, July.
    28. Melanie Morten & Jaqueline Oliveira, 2024. "The Effects of Roads on Trade and Migration: Evidence from a Planned Capital City," American Economic Journal: Applied Economics, American Economic Association, vol. 16(2), pages 389-421, April.
    29. Sam Asher & Paul Novosad, 2020. "Rural Roads and Local Economic Development," American Economic Review, American Economic Association, vol. 110(3), pages 797-823, March.
    30. Jose Asturias & Manuel García-Santana & Roberto Ramos, 2019. "Competition and the Welfare Gains from Transportation Infrastructure: Evidence from the Golden Quadrilateral of India," Journal of the European Economic Association, European Economic Association, vol. 17(6), pages 1881-1940.
    31. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    32. Adam Storeygard, 2016. "Farther on down the Road: Transport Costs, Trade and Urban Growth in Sub-Saharan Africa," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 1263-1295.
    33. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
    34. James G. MacKinnon & Matthew D. Webb, 2019. "Wild Bootstrap Randomization Inference for Few Treated Clusters," Advances in Econometrics, in: The Econometrics of Complex Survey Data, volume 39, pages 61-85, Emerald Group Publishing Limited.
    35. Leeper, Eric M. & Walker, Todd B. & Yang, Shu-Chun S., 2010. "Government investment and fiscal stimulus," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 1000-1012, November.
    36. Khandker, Shahidur R. & Koolwal, Gayatri B., 2011. "Estimating the long-term impacts of rural roads : a dynamic panel approach," Policy Research Working Paper Series 5867, The World Bank.
    37. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    38. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 200-249.
    39. Monica Paiella & Luigi Pistaferri, 2017. "Decomposing the Wealth Effect on Consumption," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 710-721, July.
    40. Foster, Andrew D & Rosenzweig, Mark R, 2004. "Agricultural Productivity Growth, Rural Economic Diversity, and Economic Reforms: India, 1970-2000," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 509-542, April.
    41. Allen, Treb & Donaldson, Dave, 2022. "Persistence and path dependence: A primer," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    42. Blane Lewis & Jasmin Chakeri, 2004. "Central development spending in the regions post-decentralisation," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 379-394.
    43. Aggarwal, Shilpa, 2018. "Do rural roads create pathways out of poverty? Evidence from India," Journal of Development Economics, Elsevier, vol. 133(C), pages 375-395.
    44. Gilles Duranton & Matthew A. Turner, 2012. "Urban Growth and Transportation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1407-1440.
    45. Benjamin Faber, 2014. "Trade Integration, Market Size, and Industrialization: Evidence from China's National Trunk Highway System," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1046-1070.
    46. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2020. "On the road: Access to transportation infrastructure and economic growth in China," Journal of Development Economics, Elsevier, vol. 145(C).
    47. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-737, July.
    48. Gollin, Douglas & Rogerson, Richard, 2014. "Productivity, transport costs and subsistence agriculture," Journal of Development Economics, Elsevier, vol. 107(C), pages 38-48.
    49. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
    50. Lindsey Currier & Edward L. Glaeser & Gabriel E. Kreindler, 2023. "Infrastructure Inequality: Who Pays the Cost of Road Roughness?," NBER Working Papers 31981, National Bureau of Economic Research, Inc.
    51. Shahidur R. Khandker & Zaid Bakht & Gayatri B. Koolwal, 2009. "The Poverty Impact of Rural Roads: Evidence from Bangladesh," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 685-722, July.
    52. Moussa P. Blimpo & Robin Harding & Leonard Wantchekon, 2013. "Public Investment in Rural Infrastructure: Some Political Economy Considerations," Journal of African Economies, Centre for the Study of African Economies, vol. 22(suppl_2), pages -83, August.
    53. Anwar Shah & Zia Qureshi & Amaresh Bagchi & Brian Binder & Heng-fu Zou, 1994. "Intergovernmental fiscal relations in Indonesia: issues and reform options," CEMA Working Papers 474, China Economics and Management Academy, Central University of Finance and Economics.
    54. Jamie S. Davidson, 2010. "Driving growth: Regulatory reform and expressways in Indonesia," Regulation & Governance, John Wiley & Sons, vol. 4(4), pages 465-484, December.
    55. A Kerem Coşar & Banu Demir & Devaki Ghose & Nathaniel Young, 2022. "Road capacity, domestic trade and regional outcomes [Trade and the topography of the spatial economy]," Journal of Economic Geography, Oxford University Press, vol. 22(5), pages 901-929.
    56. Chaurey, Ritam & Le, Duong Trung, 2022. "Infrastructure maintenance and rural economic activity: Evidence from India," Journal of Public Economics, Elsevier, vol. 214(C).
    57. Blane Lewis, 2001. "The New Indonesian Equalisation Transfer," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 37(3), pages 325-343.
    58. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2016. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," Economic Journal, Royal Economic Society, vol. 126(591), pages 317-357, March.
    59. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719.
    60. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    61. Gharad Bryan & Melanie Morten, 2019. "The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2229-2268.
    62. Green, Keith, 2005. "Decentralization and good governance: The case of Indonesia," MPRA Paper 18097, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Camilo Acosta & Luis Baldomero-Quintana, 2024. "Quality of communications infrastructure, local structural transformation, and inequality," Journal of Economic Geography, Oxford University Press, vol. 24(1), pages 117-144.
    2. Ujjayant Chakravorty & Xiangzheng Deng & Yazhen Gong & Martino Pelli & Qian Zhang, 2023. "A Tale of Two Roads: Groundwater Depletion in the North China Plain," CESifo Working Paper Series 10639, CESifo.
    3. TANAKA,Kiyoyasu, 2024. "From Walking to Driving: Economic Impact of Mountain Roads," IDE Discussion Papers 949, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Missbach, Leonard & Steckel, Jan Christoph & Renner, Sebastian & Kraus, Sebastian, 2024. "Coal-fired power plants and industrial development," EconStor Preprints 300209, ZBW - Leibniz Information Centre for Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gertler, Paul J & Gonzalez-Navarro, Marco & Gracner, Tadeja & Rothenberg, Alexander, 2023. "Road Maintenance and Local Economic Development," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt38m633q0, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Claudia N. Berg & Uwe Deichmann & Yishen Liu & Harris Selod, 2017. "Transport Policies and Development," Journal of Development Studies, Taylor & Francis Journals, vol. 53(4), pages 465-480, April.
    3. Das, Abhiman & Ghani, Ejaz & Grover, Arti & Kerr, William & Nanda, Ramana, 2024. "JUE insight: Infrastructure and Finance: Evidence from India’s GQ highway network," Journal of Urban Economics, Elsevier, vol. 142(C).
    4. Bird, Julia & Straub, Stéphane, 2020. "The Brasília experiment: The heterogeneous impact of road access on spatial development in Brazil," World Development, Elsevier, vol. 127(C).
    5. He, Guojun & Xie, Yang & Zhang, Bing, 2020. "Expressways, GDP, and the environment: The case of China," Journal of Development Economics, Elsevier, vol. 145(C).
    6. Yoshifumi Konishi & Akari Ono, 2024. "Do Winners Win More from Transport Megaprojects? Evidence from the Great Seto Bridges in Japan," Keio-IES Discussion Paper Series 2024-003, Institute for Economics Studies, Keio University.
    7. Djemaï, Elodie & Clark, Andrew E. & D’Ambrosio, Conchita, 2024. "Take the Highway? Paved roads and well-being in Africa," World Development, Elsevier, vol. 183(C).
    8. Djemaï, Elodie & Clark, Andrew E. & D’Ambrosio, Conchita, 2024. "Take the Highway? Paved roads and well-being in Africa," World Development, Elsevier, vol. 183(C).
    9. Bogart, Dan & You, Xuesheng & Alvarez-Palau, Eduard J. & Satchell, Max & Shaw-Taylor, Leigh, 2022. "Railways, divergence, and structural change in 19th century England and Wales," Journal of Urban Economics, Elsevier, vol. 128(C).
    10. Aggarwal, Shilpa, 2018. "Do rural roads create pathways out of poverty? Evidence from India," Journal of Development Economics, Elsevier, vol. 133(C), pages 375-395.
    11. Zou, Wei & Chen, Liangheng, 2024. "The impact of high-speed railway on firms’ productivity," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1374-1394.
    12. Kailthya, Subham & Kambhampati, Uma, 2022. "Road to productivity: Effects of roads on total factor productivity in Indian manufacturing," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 174-195.
    13. Yoshifumi Konishi & Akari Ono, 2024. "Do Winners Win More from Transport Megaprojects? Evidence from the Great Seto Bridge in Japan," Keio-IES Discussion Paper Series 2024-018, Institute for Economics Studies, Keio University.
    14. Wu, Mingqin & Yu, Linhui & Zhang, Junsen, 2023. "Road expansion, allocative efficiency, and pro-competitive effect of transport infrastructure: Evidence from China," Journal of Development Economics, Elsevier, vol. 162(C).
    15. Gáfaro, Margarita & Pellegrina, Heitor S., 2022. "Trade, farmers’ heterogeneity, and agricultural productivity: Evidence from Colombia," Journal of International Economics, Elsevier, vol. 137(C).
    16. Rémi Jedwab & Adam Storeygard, 2022. "The Average and Heterogeneous Effects of Transportation Investments: Evidence from Sub-Saharan Africa 1960–2010," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 1-38.
    17. Taylor Jaworski & Carl T. Kitchens, 2019. "National Policy for Regional Development: Historical Evidence from Appalachian Highways," The Review of Economics and Statistics, MIT Press, vol. 101(5), pages 777-790, December.
    18. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    19. Okamoto, Chigusa & Sato, Yasuhiro, 2021. "Impacts of high-speed rail construction on land prices in urban agglomerations: Evidence from Kyushu in Japan," Journal of Asian Economics, Elsevier, vol. 76(C).
    20. Berger, Thor, 2019. "Railroads and Rural Industrialization: evidence from a Historical Policy Experiment," Explorations in Economic History, Elsevier, vol. 74(C).

    More about this item

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:agrebk:qt8mg7z5kt. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/dabrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.