Journal of Development Economics · 2024 · Santanu Chatterjee、Thomas Lebesmuehlbacher、Abhinav Narayanan
Abstract
We investigate the impact of road infrastructure on labor markets in India’s manufacturing sector by using the variation in time spent by firms and households on completed sections of a major highway construction project. While the skill composition and overall employment remain unchanged, we find that the skill premium rises three years after the completion of a highway segment, primarily in larger firms that use transportation assets intensively. Labor market frictions significantly influence these outcomes: districts with higher skill mismatch or lower firm monopsony power see a more substantial increase in the skill premium after the completion of a highway segment.