Does Transportation Infrastructure Reduce Poverty? Evidence from the Free Federal Trunk Highway System in Mexico
Abstract: This paper provides an exploratory analysis about the effect of transportation infrastructure on poverty reductions in Mexico between 1990 and 2010. Using the density of highways and unprecedented official estimations of poverty at municipality level, I show that this type of infrastructure lead to reductions in poverty. On average, for every additional kilometer (km) of highway (km/100km2) poverty decreases in 0.4 percentage points. When comparing areas by the concentration of native population, there is no difference in the effect of highways for indigenous and non-indigenous municipalities. In addition, the study reveals that highways have more influence on poverty in periods of economic contractions. In order to address the problem of reverse causality in the placement of highways, this study applies a counterfactual proposed by Banerjee, Duflo and Qian (2012). Despite the efforts to determine causality of highways on poverty, the results have some limitations to be considered in future studies.
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