More than one billion people worldwide live in rural areas without access to the paved road network. How does the lack of such infrastructure affect rural employment and economic outcomes? We construct a comprehensive, high spatial resolution dataset of 825 million individuals in rural India to estimate the impact of a national rural road construction program that has built paved roads to over 100,000 villages since 2000. Program rules provide discontinuities in the probability of treatment at multiple village population thresholds, which we exploit using a fuzzy regression discontinuity design. Road construction to previously unconnected villages leads to a 10 percentage point reduction in the share of households and workers in agriculture, with an equivalent increase in wage labour market participation. This sectoral reallocation is concentrated among males and households with low levels of land, precisely those groups who have the lowest costs and highest returns to sectoral reallocation. Labour reallocation to wage labour is strongest in locations close to major cities, suggesting the importance of access to urban markets in the process of structural transformation. Rather than facilitating growth of non farm firms in treated villages, rural roads enable workers to access external labour markets. We also provide evidence for gains to multiple measures of economic outcomes. Our results suggest that poor rural transportation infrastructure is a major constraint on the sectoral allocation of labour in low income countries.
Samuel Asher is a Postdoctoral Research Fellow in the Economics Department and Nuffield College, University of Oxford, where he started in 2013 after receiving his PhD in Economics from Harvard University. He is also an Associate of the Center for International Development (Harvard University), a Fellow at the Centre for the Study of African Economies (University of Oxford), and a Research Associate at the Oxford Centre for the Analysis of Resource Rich Economies (University of Oxford).