This study examines the economic impact of Sindhuli Road—a 160-kilometer paved road constructed on former mountain trails—on new firm entry in Nepal. Propensity-score-weighted regression is employed to mitigate confounding bias due to the nonrandom placement of mountain roads. Nepal’s 2018 National Economic Census data on all nonfarm establishments are used in conjunction with land maps generated from remote-sensing data. The results show that the opening of Sindhuli Road significantly increased new firm entry, employment, and sales in both formal and informal sectors along the corridor. The effects vary across construction sections, industries, and genders—with pronounced impacts on economic hub regions, the tourism industry, female-led businesses, and female employment. High transportation prices for porters and pack animals suggest that a modal shift toward vehicle transportation along the corridor should substantially reduce transportation costs. Thus, paved roads in mountainous regions promote local economic development in this particular corridor in Nepal.
Kiyoyasu Tanaka (Sat,) studied this question.