Highways to prosperity: Unlocking their potential through anti-poverty interventions

How do investments in infrastructure, largely government-funded, interact with other major public investments? We explore the interaction between two coincident yet uncoordinated national programs in China: the latest highway program leading to counties’ quick and staggered highway connections and anti-poverty program implementing interventions in beneficiary counties. We compile new county-year-level highway network data and couple them with multiple datasets. Using a generalized difference-in-differences design, we exploit the quasi-experimental variation generated by the staggered rollout of connections. New highways alone have negative or limited effects on local incomes. However, counties with access to both highways and interventions experience substantial income gains, with total household income increasing by nine percent and per capita income by six percent. The impact persists over a six-year period. Evidence supports mechanisms that households are more likely to be employed, shift to non-agricultural work, improve labor mobility, develop family industries, and adopt modern agricultural technologies and cash crops.