Laying roads to more productive farming: Evidence from Ethiopia

Policy brief 7 Jan 2019 Firms

Authors

Starting in 1997, Ethiopia embarked on a comprehensive road infrastructure expansion programme, with its recent Universal Rural Road Access Programme focusing explicitly on connecting rural communities to markets.
This research quantifies the effects of Ethiopia’s new roads on aggregate and local agricultural productivity outcomes over 1996-2014. To do so, it combines a spatial framework and a novel district-level data set that overlays agricultural production data with geo-coded transportation cost data.
The main finding at the aggregate level is that real output per hectare (yield) would increase 13.6 percent if transport costs alone changed from their 1996 levels to their 2014 levels. The implied gains account for about 1/10 of the actual overall gains in Ethiopia over 1996-2014.
In terms of local effects, the gains are uneven across districts. There are other factors that matter such as the relative transport costs across crops and a district’s comparative advantage in terms of productivity.
Improvements in road networks have real productivity effects, and can contribute to a restructuring of the agricultural sector, with more export-oriented cash crop production, fewer farmers, and higher average farm size as employment shifts to other sectors of the economy. Improvements in road networks should be viewed as one of a set of policy initiatives that can generate farming productivity growth.