benefiting from corridor improvements tend to specialize more in manufacturing and traded nonagricultural goods. However, not all regions that benefit from better connectivity would experience an increase in specialization in manufacturing. Additional investments to increase productivity, such as investments in electricity or internet connectivity, could help manufacturing in some locations prosper—instead of decreasing the associated increase in competition. When investment is limited to corridors, some regions would lose in terms of regional income, while others would gain. When complemented with reforms to reduce border time, a large majority would gain from lower trade costs and new regional trade opportunities.
Notes 1. While this chapter discusses how such transport investments can be assessed using the h euristic framework outlined in chapter 6, a broader treatment of the conditions under which largescale investments in transport infrastructure can generate positive spillovers on local household income, jobs, equity, and poverty reduction can be found in a recent report by the Asian Development Bank, UK Department for International Development, Japan International Cooperation Agency, and the World Bank, The WEB of Transport Corridors in South Asia (ADB, DfID, JICA, and World Bank 2018). That report examines international c orridors as well as domestic ones. It argues that the benefits are likely to be amplified with complementary investments in trade facilitation as well as soft policies that reduce frictions in capital, labor, land, and product markets or improve institutions such as public sector governance, contract enforcement, and access to social services. 2. The US data are from the American Road & Transportation Builders Association. Developing country estimates are from the World Bank, Roads Cost Knowledge System (ROCKS), Version 2.3. 3. In 1816, when the United States was just developing, it cost as much to move goods 30 miles overland as it did to cross the Atlantic Ocean. Consequently, the Erie Canal provided a stunning reduction in transportation costs, and in turn was supplanted by rail. Today, passengers can readily fly or drive to cities hundreds of miles apart, such as Los Angeles and San Francisco, so the benefits of rail are far more muted (Glaeser and Poterba 2020). 4. This would entail an exercise in which resource constraints are properly imposed, private s ector responses are modelled, market imperfections are made explicit, and real income (utility) benefits are accurately calculated. 5. A growing literature on the spatial impacts of transport includes Fajgelbaum and Redding (2014) for Argentina; Donaldson (2018) for India; Lall and Lebrand (2020) for the Belt and Road Initiative in Central Asia; Balboni (2019) for Vietnam; and Herrera-Dappe and Lebrand (2019, 2021) for Bangladesh and East Africa, respectively. 6. It is not only the size and cost of accessing neighboring markets that matters, but also the intensity of competition and prices that prevail in those neighboring markets. 7. The standard approach taken by research is a regression of a change in outcome, such as local employment or productivity, on a change in infrastructure (or sometimes an initial level of infrastructure—a valid approach when adjustments are slow). 8. For a thorough discussion of identification issues for transportation projects, see Redding and Turner (2015). 9. Several countries attempt to measure induced changes in quantity in their transport appraisal methodologies. Doing so requires calculating the effect of transport on the effective density of each place, and then combining this with econometric estimates of agglomeration effects, as measured by the elasticity of productivity with respect to economic mass.
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