Connecting Markets in Nepal: Evidence from Randomised Bridge Construction

Nepal features extremely rugged terrain, low levels of development, and, especially after the 2015 earthquake, inadequate transportation infrastructure. With funding from the World Bank, Nepal is about to embark on a major bridge construction initiative that includes the construction of 115 new vehicular bridges across the country over four years. In order to learn how to prioritise future bridge funding, the Government of Nepal has entered into an agreement with the World Bank to randomise the timing of bridge construction across the identified sites. This context provides a unique opportunity to learn about the effects of transportation infrastructure in a developing country, which are notoriously difficult to identify as: 1) governments tend to focus projects in places where they think the projects will have the greatest effect; and 2) increased market access has a variety of simultaneous effects.

In this project, Alam et al. will exploit the randomisation of the timing of bridge construction and collect detailed survey data to study how firms are affected when transportation infrastructure provides them with access to new markets (that may bring more customers and cheaper inputs), and when outside firms gain access to their local markets (that intensifies product market competition). The researchers will conduct firm-level surveys focusing on two categories of firms. First, they will survey local firms on each side of the bridge sites. Second, they will focus on large employers in particular industries that have geographic spread throughout the country. These larger firms are best poised to take advantage of improved access to outside marketsand are important as Nepal’s leading export sectors.

Transportation infrastructure is a major budget item for governments around the world, and is the single largest component of World Bank spending. This project seeks to help policymakers directly answer two questions. First, what are the economic returns to transportation infrastructure? This is a particularly important question because transportation infrastructure is very expensive, and in developing countries budgets are tight. Second, in what locations should transportation infrastructure be prioritised? That is, what characteristics of places predict higher returns from transportation infrastructure?

 

Authors

Muneeza Alam

World Bank

Théophile Bougna

World Bank

Wyatt Brooks

University of Notre Dame

Kevin Donovan

Yale School of Management