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Road to productivity: effects of roads on total factor productivity in Indian manufacturing

Kailthya, S. and Kambhampati, U. ORCID: (2021) Road to productivity: effects of roads on total factor productivity in Indian manufacturing. Journal of Comparative Economics. ISSN 0147-5967

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To link to this item DOI: 10.1016/j.jce.2021.08.001


A denser road network lowers transport costs and stimulates manufacturing total factor productivity (TFP). The placement of roads, however, is likely to be non-random. For identification, we exploit cross-state variation in the strength of centre-state partisan alignment that asymmetrically affects road building in aligned states. Using panel data on manufacturing establishments in India from 1998 to 2012, we find that, a 1% increase in road density raises value-added TFP by about 0.25%, on average. A closer examination reveals that the effect varies by plant characteristics and road type. Younger establishments are more likely to gain from a denser road network with highways playing a prominent role. The results are robust to imperfections in the instrument and to other sensitivity checks.

Item Type:Article
Divisions:Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:100079

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