Hit the Road Juan: Welfare and Labor Market Effects of High-Quality Roads in Ecuador

Road infrastructure boosts economic opportunities and thus contributes to poverty alleviation. This paper investigates the causal impact of paved primary roads on poverty and income mobility in Ecuador, with particular attention to the mechanisms through which these effects materialize. exploiting variation in road expansion between 2012 and 2019, we track the construction of new major roads and link this information to socioeconomic outcomes reported in the national household survey. To achieve representativeness at a fine geographical scale, we employ the max-p region algorithm. Using staggered difference-in-differences estimators, we identify the causal effects of road infrastructure on poverty reduction and income dynamics. The findings indicate that access to paved major roads significantly reduces poverty rates overall. Middle-income households benefit from income growth following road access and these gains are attributable primarily to improvements in employment quality rather than increases in employment rates, with the largest effects concentrated in the primary sector.