Roads: From Trade Liberalization to Firm Productivity

45 Pages Posted: 28 May 2019

See all articles by Matteo Fiorini

Matteo Fiorini

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Marco Sanfilippo

University of Antwerp - Institute of Development Policy and Management

Asha Sundaram

University of Auckland - Department of Economics

Date Written: May 2019

Abstract

We examine the complementary role of road infrastructure in determining the impact of a reduction in input tariffs on firm productivity. We combine newly constructed geo-spatial data from Ethiopia on road improvements under the Ethiopian Road Sector Development Program with detailed establishment level data on manufacturing firms. To explore the impact of roads, we construct a measure of market access capturing the intensity of possible road connections between the town in which a firm is located and other intranational markets. Road improvements under the program give us rich spatial and time variation in market access. We find strong complementarity between roads and input tariff liberalization. A reduction in the input tariff is associated with a larger increase in firm productivity in areas with better market access. Our study highlights the role of roads in shaping the effects of trade liberalization on firms.

Keywords: input tariffs; transport infrastructure; roads; firms; productivity; Ethiopia

JEL Classification: F14; O14; O18

Suggested Citation

Fiorini, Matteo and Sanfilippo, Marco and Sundaram, Asha, Roads: From Trade Liberalization to Firm Productivity (May 2019). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2019/32, Available at SSRN: https://ssrn.com/abstract=3393548 or http://dx.doi.org/10.2139/ssrn.3393548

Matteo Fiorini (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Marco Sanfilippo

University of Antwerp - Institute of Development Policy and Management ( email )

City campus building S
Lange Sint Annastraat 7
Antwerp, 2000
Belgium

Asha Sundaram

University of Auckland - Department of Economics ( email )

Auckland
New Zealand

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