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Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua

Author

Listed:
  • Kevin Donovan

    (University of Notre Dame)

  • Wyatt Brooks

    (University of Notre Dame)

Abstract

We estimate the impact of new bridges in rural Nicaraguan villages facing seasonal floods that unpredictably eliminate access to outside markets. We collect detailed annual household surveys over three years and conduct weekly telephone followups with a subset of households for sixty-four weeks, both before and after construction. This information is collected in villages where bridges are built, and in comparable villages where no bridge was built for only engineering-related reasons. We find that bridges eliminate uncertainty in market access driven by floods: in absence of a bridge, household income falls significantly during floods. Bridges completely eliminate this effect. Compared to households in villages where no bridges are built, bridges cause substantial reallocation of activities between farming and wage work. There are also significant effects on agricultural choices: increased fertilizer spending, increased yields on farms, and lower crop storage. We develop a model of occupational choice and risky farm investment, and show that these results are a rational response to reduced market income risk from the bridges. We provide evidence that these results are not due to lower trade costs outside of flooding periods, nor due to looser collateral constraints.

Suggested Citation

  • Kevin Donovan & Wyatt Brooks, 2017. "Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua," 2017 Meeting Papers 1607, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:1607
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    File URL: https://economicdynamics.org/meetpapers/2017/paper_1607.pdf
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    References listed on IDEAS

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    1. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 597-652.
    2. Eva Van Leemput, 2016. "A Passage to India : Quantifying Internal and External Barriers to Trade," International Finance Discussion Papers 1185, Board of Governors of the Federal Reserve System (U.S.).
    3. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    4. Rosenzweig, Mark & Udry, Christopher, 2016. "External Validity in a Stochastic World," Center Discussion Papers 242440, Yale University, Economic Growth Center.
    5. José Asturias & Manuel García-Santana & Roberto Ramos, 2016. "Competition and the Welfare Gains from Transportation Infrastructure: Evidence from the Golden Quadrilateral of India," Working Papers 907, Barcelona Graduate School of Economics.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. “Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua,” W. Brooks & K. Donovan (2018)
      by afinetheorem in A Fine Theorem on 2018-07-24 07:46:30

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    Cited by:

    1. Wouter (W.) Zant, 2017. "Bridges," Tinbergen Institute Discussion Papers 17-117/V, Tinbergen Institute, revised 08 Aug 2018.
    2. Agha Ali Akram & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2017. "Effects of Emigration on Rural Labor Markets," NBER Working Papers 23929, National Bureau of Economic Research, Inc.

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