Chinese Roads in India: The Effect of Transport Infrastructure on Economic Development

96 Pages Posted: 20 Oct 2016 Last revised: 10 Nov 2019

See all articles by Simon Alder

Simon Alder

Swiss National Bank; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: October 27, 2016

Abstract

This paper uses a general equilibrium trade framework to estimate the contribution of transport infrastructure to regional development. I apply the analysis to India, a country with a notoriously weak and congested transportation infrastructure. I first analyze the development effects of a recent Indian highway project that improved connections between the four largest economic centers. I estimate the effect of this new infrastructure on income across districts using satellite data on night lights. The results show large aggregate gains from the Indian highway project, but unequal effects across regions. China has followed a different highway construction strategy and has experienced more significant convergence across regions than India. I therefore use the model to gauge the effects of a counterfactual highway network for India that replicates the Chinese strategy of connecting intermediate-sized cities. I use an iterative procedure to design a network among the targeted Indian cities that equalizes marginal costs and benefits of building roads within the general equilibrium framework. The results suggest that a network that connects intermediate-sized cities in an approximately optimal way is substantially larger than the existing network, would have large aggregate net gains, and it would benefit the lagging regions of India.

Keywords: Transport Infrastructure, Economic Growth, Regional Development, Trade, Network Design, India, China, Geographic Information System, Satellite Data, Night Lights

JEL Classification: F11, F14, F15, O11, O18, R12, R13

Suggested Citation

Alder, Simon, Chinese Roads in India: The Effect of Transport Infrastructure on Economic Development (October 27, 2016). Available at SSRN: https://ssrn.com/abstract=2856050 or http://dx.doi.org/10.2139/ssrn.2856050

Simon Alder (Contact Author)

Swiss National Bank ( email )

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
146
Abstract Views
587
rank
236,524
PlumX Metrics