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

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  • 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.
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  • 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
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    2. Camilo Andrés Acosta Mejía, Luis Baldomero-Quintana, 2022. "Quality of Communications Infrastructure, Local Structural Transformation, and Inequality," Documentos de Trabajo CIEF 20505, Universidad EAFIT.

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    More about this item

    JEL classification:

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

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