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Road infrastructure and skill premium: Evidence from Indian manufacturing

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  • Chatterjee, Santanu
  • Lebesmuehlbacher, Thomas
  • Narayanan, Abhinav

Abstract

We investigate the impact of road infrastructure on labor markets in India’s manufacturing sector by using the variation in time spent by firms and households on completed sections of a major highway construction project. While the skill composition and overall employment remain unchanged, we find that the skill premium rises three years after the completion of a highway segment, primarily in larger firms that use transportation assets intensively. Labor market frictions significantly influence these outcomes: districts with higher skill mismatch or lower firm monopsony power see a more substantial increase in the skill premium after the completion of a highway segment.

Suggested Citation

  • Chatterjee, Santanu & Lebesmuehlbacher, Thomas & Narayanan, Abhinav, 2025. "Road infrastructure and skill premium: Evidence from Indian manufacturing," Journal of Development Economics, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:deveco:v:174:y:2025:i:c:s0304387824001573
    DOI: 10.1016/j.jdeveco.2024.103408
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    More about this item

    Keywords

    Infrastructure; Roads; Public investment; Golden Quadrilateral; Manufacturing; Skill premium; Monopsony; Capital-skill complementarity; Skill mismatch;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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