The impact of Ethiopia’s road investment program on economic development and land use: evidence from satellite data

This paper examines the impact of Ethiopia’s Road Sector Development Program (RSDP) from 1997–2016 on land use and economic activity, using spatial variation in road upgrades and satellite imagery. We use three approaches to triangulate the effect of the RSDP: difference-in-differences examining economic activity near upgraded roads, long-difference instrumental variables comparing areas connected to upgraded versus non-upgraded roads, and market access analysis. For RSDP phases I-III, upgrades increase local economic activity, with effects varying by baseline activity. Areas with medium-to-high baseline activity showed positive effects, while areas with the lowest activity showed minimal effects. Results are weaker for RSDP IV.