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The impact of improved highways on Indian firms

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  • Datta, Saugato

Abstract

India's Golden Quadrilateral Program, a major highway project, aimed at improving the quality and width of existing highways connecting the four largest cities in India. It affected the quality of highways available to firms in cities that lay along the routes of the four upgraded highways, while leaving the quality of highways available to firms in other cities unaffected. This feature of the project allows for a difference-in-difference estimation strategy, where status on and off the improved highways, and distance from them, are used as treatment variables. This strategy is implemented using data from the 2002 and 2005 rounds of the World Bank Enterprise Surveys for India. Firms in cities affected by the Golden Quadrilateral highway project reduced their average stock of input inventories by between 6 and 12days’ worth of production. Firms in cities where road quality did not improve showed no significant changes. The reduction in stocks of input inventories also varied inversely with the distance between the city in which a firm was located and the nearest city on an improved highway. Firms on the Golden Quadrilateral were also more likely to have switched the supplier who provided them with their primary input, suggesting that they saw reason to re-optimize their choice of supplier after the arrival of better highways. Consistent with these findings, firms on the improved highways reported decreased transportation obstacles to production, while firms in control cities reported no such change.

Suggested Citation

  • Datta, Saugato, 2012. "The impact of improved highways on Indian firms," Journal of Development Economics, Elsevier, vol. 99(1), pages 46-57.
  • Handle: RePEc:eee:deveco:v:99:y:2012:i:1:p:46-57
    DOI: 10.1016/j.jdeveco.2011.08.005
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    References listed on IDEAS

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    Cited by:

    1. P. Charnoz & C. Lelarge & C. Trevien, 2016. "Communication Costs and the Internal Organization of Multi-Plant Businesses: Evidence from the Impact of the French High-Speed Rail," Documents de Travail de l'Insee - INSEE Working Papers g2016-02, Institut National de la Statistique et des Etudes Economiques.
    2. repec:dau:papers:123456789/13581 is not listed on IDEAS
    3. repec:eee:wdevel:v:96:y:2017:i:c:p:198-215 is not listed on IDEAS
    4. Roberto Ramos & Manuel García-Santana & Jose Asturias, 2014. "Misallocation, Internal Trade, and the Role of Transportation Infrastructure," 2014 Meeting Papers 1035, Society for Economic Dynamics.
    5. Stephan Fretz & Raphaël Parchet & Frédéric Robert-Nicoud, 2017. "Highways, Market Access and Spatial Sorting," SERC Discussion Papers 0227, Spatial Economics Research Centre, LSE.
    6. repec:eee:regeco:v:65:y:2017:i:c:p:116-126 is not listed on IDEAS
    7. Audretsch, David B. & Dohse, Dirk & dos Santos, João Pereira, 2017. "Do toll-free highways foster firm formation and employment growth? Results from a quasi-natural experiment," Kiel Working Papers 2080, Kiel Institute for the World Economy (IfW).
    8. repec:eee:deveco:v:135:y:2018:i:c:p:461-477 is not listed on IDEAS
    9. Mitnik, Oscar A. & Sanchez, Raul & Yanez-Pagans, Patricia, 2018. "Bright Investments: Measuring the Impact of Transport Infrastructure Using Luminosity Data in Haiti," IZA Discussion Papers 12018, Institute of Labor Economics (IZA).
    10. Eric Strobl & Marie-Anne Valfort, 2015. "The Effect of Weather-Induced Internal Migration on Local Labor Markets. Evidence from Uganda," World Bank Economic Review, World Bank Group, vol. 29(2), pages 385-412.
    11. HOSONO Kaoru & MIYAKAWA Daisuke & ONO Arito & UCHIDA Hirofumi & UESUGI Iichiro, 2019. "Damage to the Transportation Infrastructure and Disruption of Inter-firm Transactional Relationships," Discussion papers 19043, Research Institute of Economy, Trade and Industry (RIETI).
    12. Volpe Martincus, Christian & Carballo, Jerónimo & Cusolito, Ana, 2017. "Roads, exports and employment: Evidence from a developing country," Journal of Development Economics, Elsevier, vol. 125(C), pages 21-39.
    13. Holl, Adelheid, 2016. "Highways and productivity in manufacturing firms," Journal of Urban Economics, Elsevier, vol. 93(C), pages 131-151.
    14. repec:eee:jotrge:v:72:y:2018:i:c:p:139-150 is not listed on IDEAS
    15. Iimi,Atsushi & Humphrey,Richard Martin & Melibaeva,Sevara, 2015. "Firm inventory behavior in east Africa," Policy Research Working Paper Series 7280, The World Bank.
    16. Guojun He & Yang Xie & Bing Zhang, 2017. "Balancing Development and the Environment in a Changing World: Expressways, GDP, and Pollution in China," HKUST IEMS Working Paper Series 2017-43, HKUST Institute for Emerging Market Studies, revised Aug 2017.
    17. César Salazar & Sam Jones, 2017. "The impact of infrastructure shocks on agricultural markets: Evidence from the Zambezi river in Mozambique," WIDER Working Paper Series 191, World Institute for Development Economic Research (UNU-WIDER).
    18. repec:ipg:wpaper:2014-460 is not listed on IDEAS
    19. 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.
    20. João Pereira dos Santos & David B. Audretsch & Dirk Christian Dohse, 2018. "The Effects of Highway Tolls on Private Business Activity – Results from a Natural Experiment," GEE Papers 0107, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jun 2018.
    21. Hanson, Gordon H. & Xiang, Chong, 2013. "Exporting Christianity: Governance and doctrine in the globalization of US denominations," Journal of International Economics, Elsevier, vol. 91(2), pages 301-320.
    22. Chauvet, Lisa & Ehrhart, Hélène, 2018. "Aid and growth: evidence from firm-level data," Journal of Development Economics, Elsevier, vol. 135(C), pages 461-477.
    23. repec:eee:deveco:v:133:y:2018:i:c:p:375-395 is not listed on IDEAS
    24. Stephen Smith, 2018. "Development Economics Meets the Challenges of Lagging U.S. Areas: Applications to Education, Health and Nutrition, Behavior, and Infrastructure," Working Papers 2018-7, The George Washington University, Institute for International Economic Policy.

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