by 16 percentage points. The findings of a study by Minten, Korn, and Stifel (2013) for northwestern Ethiopia point to the link between higher transport costs and agricultural input prices. Another study by Stifel, Minten, and Koru (2016) suggests that rural feeder roads have internal rates of return of 12–35 percent.

Another collection of literature to which this study is related is about the impacts of disaster shocks on welfare and poverty, and the role that better connectivity can play in alleviating these impacts. As an agrarian economy dependent on smallholder rain-fed agriculture—located in one of the world’s most drought-prone regions—Ethiopia has been historically susceptible to drought and, despite recent economic growth, well-being remains highly vulnerable to drought. Several previous studies have analyzed the impacts of droughts on consumption (Gao and Mills 2018; Dercon, Hoddinott, and Woldehanna 2005; Fuje 2017), poverty trap (Carter et al. 2007), long-term nutrition outcomes (Dercon and Porter 2014), and asset and wealth and inequality (Little et al. 2006; Thiede 2014). Recently, research focusing on Ethiopia has also shown that better connectivity can help alleviate the negative effects of drought. Hill and Fuje (2018) examine the effects of droughts on grain prices in Ethiopia, and find that this effect was substantially weaker in the post-2007 period compared to earlier periods, a finding that can partly be explained by better market access through road investments. Focusing on the 2015/16 El Niño drought, Hirvonen et al. (2017) find that the drought negatively affected child nutrition in places that were poorly connected, but not in betterconnected places. This study contributes to this line of literature by shedding new light on the role of rural connectivity in potentially alleviating the impact of adverse weather droughts.

The rest of this report is structured as follows. Section 2 reviews the recent placement of rural roads in Ethiopia. Section 3 describes the data: the Ethiopia road database and the ESS. Section 4 explains the empirical strategy to identify and estimate impacts of rural road developments on welfare and other outcomes. Section 5 reports the estimation results of DID matching models. Finally, Section 6 concludes with a brief summary of the findings and discussion.

# **2. Recent rural road development in Ethiopia**

Among several programs that have contributed to recent rural road developments in Ethiopia, the URRAP has provided all-weather connections to rural communities (or kebeles) at the largest scale since 2010.<sup>6</sup> Through the upgrading of existing fair-weather access roads or unimproved tracks, URRAP brings those unclassified roads into the classified network. With 100% funding from the central government and technical support from regional and zonal governments, woredas identify project areas by prioritizing based on population, traffic, and facilities served. However, actual practice of prioritization is unclear and varies regionally. URRAP road construction work is partly the responsibility of the beneficiary communities. Communities in principle carry out site clearance and preliminary earth work as a contribution in kind, yet actual practice differs by regions. On

> 6 A ‘kebele’ is a subdivision of woreda and the smallest administrative unit in Ethiopia. It is similar to a ward, a neighborhood, or parish in other countries. We refer to it as community in the remaining part of this paper. Woreda is an administrative unit of one level higher than kebele.

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