Bridge to Bigpush or Backwash? Market Integration, Reallocation, and Productivity Effects of Jamuna Bridge in Bangladesh

61 Pages Posted: 1 May 2018

See all articles by Brian Blankespoor

Brian Blankespoor

World Bank - Development Research Group (DECRG)

M. Shahe Emran

George Washington University - Department of Economics

Forhad Shilpi

World Bank - Development Research Group (DECRG)

Lu Xu

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: April 13, 2018

Abstract

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. We develop a spatial general equilibrium model with a core and two hinterlands at the opposite sides separated by rivers and allow for productivity gains through agglomeration in both 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 inter-regional trade requires local services (e.g. processing and trading), and (iii) the strongest effects on employment structure felt not necessarily are in the areas next to the bridge but in the areas that move out of autarky as a result of the bridge.

In empirical estimation, we use 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 due to idiosyncratic political factors. In the short run, we find 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, consistent with the de-industrialization effect emphasized in core-periphery models. 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.

Keywords: Core-Periphery, Density, Deindustrialization, Agricultural Productivity, Bridge, Bigpush, Backwash, Agglomeration

JEL Classification: R40, R13, O18, O13, O14

Suggested Citation

Blankespoor, Brian and Emran, M. Shahe and Shilpi, Forhad and Xu, Lu, Bridge to Bigpush or Backwash? Market Integration, Reallocation, and Productivity Effects of Jamuna Bridge in Bangladesh (April 13, 2018). Available at SSRN: https://ssrn.com/abstract=3162451 or http://dx.doi.org/10.2139/ssrn.3162451

Brian Blankespoor

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, NW
Washington, DC 20433
United States

HOME PAGE: http://https://sites.google.com/site/decrgbrianblankespoor/

M. Shahe Emran (Contact Author)

George Washington University - Department of Economics ( email )

2115 G Street NW
302 Monroe Hall
Washington, DC 20052
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Forhad Shilpi

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
United States
202-458-7476 (Phone)
202-522-1151 (Fax)

Lu Xu

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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