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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.

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  • 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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    Cited by:

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    2. Krantz, Sebastian, 2024. "Mapping Africa's infrastructure potential with geospatial big data and causal ML," Kiel Working Papers 2276, Kiel Institute for the World Economy.
    3. Yu Zhang & Zhenzhen Lin & Renhui Zhang & Kai Zhao, 2025. "The impact of digital capabilities on farmers’ choice of marketing channels: evidence from rural areas of the Yellow River Basin in China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-14, December.
    4. Ahmed, Musa Hasen, 2025. "Early growing season temperature variation and fertilizer use among smallholder farmers," Food Policy, Elsevier, vol. 133(C).
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    6. Yuanqian He & Yiting Chen, 2024. "The Impact of Agricultural Cooperatives on Farmers’ Agricultural Revenue: Evidence from Rural China," Sustainability, MDPI, vol. 16(24), pages 1-22, December.
    7. Kouandou, Arouna & Zeh, Inès Pérolde, 2024. "Insuring consumption against Shocks: The role of informal savings in Nigeria," Food Policy, Elsevier, vol. 129(C).
    8. Ahmed, Musa Hasen & Tesfaye, Wondimagegn Mesfin, 2025. "Infrastructure-driven healthcare advancements: Rural Roads and Maternal Health in Ethiopia," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 118(C).
    9. Pkhikidze,Nino, 2024. "Connectivity, Road Quality, and Jobs : Evidence from Armenia," Policy Research Working Paper Series 10847, The World Bank.

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    Keywords

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    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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