Road capacity, domestic trade and regional outcomes

Journal article

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% 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.

Authors: Coşar, AK; Demir, B; Ghose, D; Young, N

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Oxford University Press
• Journal: Journal of Economic Geography
• Volume: 22
• Issue: 5
• Pages: 901-929
• Publication date: 2021-12-21
• Acceptance date: 2021-11-16
• DOI: 10.1093/jeg/lbab045
• EISSN: 1468-2710
• ISSN: 1468-2702
• Language: English
• Keywords: FFR; market access; transportation infrastructure; trade