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Roads and the Geography of Economic Activities in Mexico

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Document pages: 42 pages

Abstract: This paper estimates the impacts of road improvements on local employment and specialization in Mexico for 1986-2014, through changes in access to domestic markets and travel costs to ports and the U.S. border. Instrumenting for road placement endogeneity and addressing the recursion problem in regressions that involve access to markets, the analysis finds significant and positive causal effects of improved domestic accessibility on employment and specialization. It also finds that employment is stimulated by lower transport costs to the U.S. border, but harmed by lower transport costs to ports. Heterogeneous effects are found across sectors and regions.

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