Bridge to Bigpush or Backwash? : Market Integration, Reallocation, and Productivity Effects of Jamuna Bridge in Bangladesh
This paper uses a quasi-experimental study of a major bridge construction in Bangladesh to understand the effects of a large reduction in trade costs on the pattern of structural change and agricultural productivity. The paper develops a spatial ge...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/833881531163087038/Bridge-to-bigpush-or-backwash-market-integration-reallocation-and-productivity-effects-of-Jamuna-bridge-in-Bangladesh http://hdl.handle.net/10986/29981 |
| Summary: | This paper uses a quasi-experimental
study of a major bridge construction in Bangladesh to
understand the effects of a large reduction in trade costs
on the pattern of structural change and agricultural
productivity. The paper develops a spatial general
equilibrium model with a core and two hinterlands at the
opposite sides separated by rivers, and allows for
productivity gains through agglomeration in the agriculture
and manufacturing sectors. The model yields insights
different from the standard core-periphery and trade models:
(i) the newly connected hinterland may experience higher
population density and agricultural productivity despite
significant de-industrialization; (ii) even with increased
specialization in agriculture, the share of agricultural
employment may decline when interregional trade requires
local services (such as processing and trading); and (iii)
the strongest effects on employment structure are felt not
necessarily in the areas next to the bridge but in the areas
that move out of autarky as a result of the bridge. The
empirical estimation uses doubly robust estimators in a
difference-in-difference design where the comparison
hinterland comes from a region which was supposed to be
connected to the core (capital city) by the proposed, but
not yet constructed, Padma bridge. In the short run, there
is significant labor reallocation from agriculture to
services in the connected hinterland, but no perceptible
effects on the employment share of manufacturing, population
density, and night-lights. In the long run, the labor share
of manufacturing declines in the treatment hinterland and
increases in the core. However, there are significant
positive effects on population density, night light
luminosity, and agricultural yields in the treatment
hinterland which contradict backwash effects of the bridge.
The effects of the bridge on intersectoral labor allocation
are spatially heterogeneous, with relatively weak effects in
the areas close to the bridge. |
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