Impact of Golden Quadrilateral on Indian Manufacturing…

Superb paper by trio –  Ejaz Ghani, Arti Grover Goswami and William R. Kerr.

They look at whether the Golden Quadrilateral project helped increase productivity in firms located around GQ highway:

We investigate the impact of the Golden Quadrilateral (GQ) highway project on the Indian organized manufacturing sector using enterprise data. The GQ project upgraded the quality and width of 5,846 km of roads in India. We use a difference-in-difference estimation strategy to compare non-nodal districts based upon their distance from the highway system.

We find several positive effects for non-nodal districts located 0-10 km from GQ that are not present in districts 10-50 km away, most notably higher entry rates and increases in plant productivity. These results are not present for districts located on another major highway system, the North-South East-West corridor (NS-EW). Improvements for portions of the NS-EW system were planned to occur at the same time as GQ but were subsequently delayed. Additional tests show that the GQ project’s effect operates in part through a stronger sorting of land-intensive industries from nodal districts to non-nodal districts located on the GQ network. The GQ upgrades further helped spread economic activity to moderate-density districts and intermediate cities.

So the evidence is pretty much on expected lines. Regions around GQ saw rise in productivity. The interesting bit is how land intensive industries come up around GQ…

Though the paper could have been made  a little more easier to read. You get lost in the middle and have to keep revisiting the terms etc..

More to come:

There are several points of future research that we hope to undertake. First, we are continuing to examine the extent to which the GQ project improved the allocative efficiency of the manufacturing sector in India. Given the high levels of misallocation with which India is starting, improvements in allocation are most important. Second, we intend to study next the impact of the GQ upgrades on the unorganized sector. Ghani et al. (2012) highlight the extent to which the organized and unorganized sectors are moving in different directions within India, with the unorganized sector becoming more urbanized, and we need to better understand the role that infrastructure connections across districts play in this process. This work will also examine issues like the gender of business owners to understand how improved highways affect sub-groups of the population differently. Finally, looking beyond the manufacturing sector, it will be very interesting to use satellite-based data to examine the aggregate economic outcome associated with these upgrades.





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