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Road Capacity, Domestic Trade and Regional Outcomes

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  • Demir, Banu
  • Cosar, Kerem
  • Ghose, Devaki
  • Young, Nathaniel

Abstract

What is the impact on intra-national trade and regional economic outcomes when the quality and lane-capacity of an existing paved road network is expanded significantly? We investigate this question for the case of Turkey, which undertook a large-scale public investment in roads during the 2000s. Using spatially disaggregated data on road upgrades and domestic transactions, we estimate a large positive impact of reduced travel times on trade as well as local manufacturing employment and wages. A quantitative exercise using a workhorse model of spatial equilibrium implies heterogeneous effects across locations, with aggregate real income gains reaching 2-3 percent in the long-run. Reductions in travel times increased local employment-to-population ratio but had no effect on local population. We extend the model by endogenizing the labor supply decision to capture this finding. The model-implied elasticity of employment rates to travel time reductions captures about one-third of the empirical elasticity.

Suggested Citation

  • Demir, Banu & Cosar, Kerem & Ghose, Devaki & Young, Nathaniel, 2021. "Road Capacity, Domestic Trade and Regional Outcomes," CEPR Discussion Papers 16512, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16512
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    1. is not listed on IDEAS
    2. Jan Willem Gunning & Pramila Krishnan & Andualem T. Mengistu, 2024. "Fading choice: transport costs and variety in consumer goods," Economica, London School of Economics and Political Science, vol. 91(363), pages 1100-1123, July.
    3. Daniel Riera-Crichton & William Maloney & Guillermo Vuletin & Elena Ivanova Ianchovichina & Guillermo Beylis & Guillermo Vuletin, "undated". "The Promise of Integration: Opportunities in a Changing Global Economy [El Potencial de la Integración: Oportunidades en una Economía Global Cambiante]," World Bank Publications - Reports 39612, The World Bank Group.
    4. Cosar,Ahmet Kerem, 2022. "Overland Transport Costs : A Review," Policy Research Working Paper Series 10156, The World Bank.
    5. Han Zhang & Dongli Wu, 2022. "The Impact of Transport Infrastructure on Rural Industrial Integration: Spatial Spillover Effects and Spatio-Temporal Heterogeneity," Land, MDPI, vol. 11(7), pages 1-18, July.

    More about this item

    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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