Transportation upgrades and structural transformation in the labor market: Evidence from a road improvement project in benin

Abstract

How do transportation upgrades affect structural transformation in the labor market in developing countries? We focus on a specific case, Benin’s Djougou-N’dali Road Improvement Project conducted between 2004 and 2010, and estimate its effects on changes in the composition of workers by sector. Our difference-in-differences estimates suggest evidence of structural transformation in the labor market: the road improvement project leads to a relative increase in the proportion of workers in the industrial sector by 3.9 percentage points, representing a 30-percent increase. This is accompanied by a sharp decrease in the proportion of agricultural workers and an overall insignificant decrease in the proportion of service workers. These labor market effects are spatially heterogeneous: changes in agricultural workers and service workers are significant only in rural and urban areas, respectively, while both two types of areas see an increase in the proportion of industrial workers. Besides, these effects are significant only for female workers. Our findings present direct labor market effects of transportation upgrades through job switches across sectors, while other labor market mechanisms cannot explain structural transformation.

Keywords

• Road
• Labor market
• Structural transformation
• Rural-urban
• Women
• Africa