Publication - Project Report
Roads to trade: The welfare effects of connecting mines versus cities
Should African countries build more transport infrastructure to export natural resources to overseas markets, or should they focus on improving internal and regional connectivity between cities?
This is an important question, with no easy answer. On the one hand, Africa has a comparative advantage in primary commodities, and the first strategy may best serve her trade. On the other hand, to improve internal connectivity is a top priority of development agencies, on the premise that more regional market integration is needed to foster sustainable growth.
The aim of this project is to help to make an informed decision between these development strategies, by studying the role of natural resources in shaping the development of road infrastructure in West Africa. By investigating the impact of new mine-to-coast connections on the spatial equilibrium of the economy, and by comparing this to a benchmark “optimal” infrastructure network, we may learn lessons about what kind of transport infrastructure the African countries most badly need.
- This project will contribute to a growing literature on the economic impact of transport infrastructure. The literature has looked at the impact of infrastructure on the location of economic activity, market integration, and long-run economic growth. The project adds to this literature by investigating the effect of a specific type of transport infrastructure, the one built to connect natural resources to the coast in developing countries.
- It is widely recognised that one of the main constraints on growth in Africa is poor transport infrastructure, particularly when it comes to connections between regional trading partners. Since there is evidence that new roads do increase trade and that roads affect the volume of exports for connected cities, it is of interest to policy makers how they should prioritise limited funds for investment in infrastructure, given that most West African countries have either neglected infrastructure or prioritised connections between mines and ports. Given the importance of mining in the region of West Africa, we expect demand for the results of the project to come from a variety of governments in the region.
- The project can be divided into two parts. In the first part, we want to understand which roads among those built or improved since colonial times can be attributed to the need to export natural resources. We then want to measure the impact of such resource-related infrastructure on the spatial equilibrium of the domestic economy by developing a model of trade between domestic locations, regional locations, and the rest of the world, which in turn depends on available transport infrastructure. How did such infrastructure affect the relative cost of trading domestically and regionally, versus trading with overseas countries? How did it affect the location of population, cities and economic activity? What impact did it have on measures of individual welfare? The model will allow us to compare the actual expansion path to several relevant counterfactuals. Building on these two parts, we will then use our historical and counterfactual analysis to learn lessons about optimal investment in transport infrastructure in Africa today.