examines whether the development of rural roads mitigated the welfare shocks from recent severe droughts.

The primary empirical approach is difference-in-differences (DID) matching based on road network and household panel data sets. A panel road network database is constructed for multiple years so that changes over time in rural roads and various welfare and economic outcomes can be compared. For the outcome measures, this study relies on the three waves of a panel household survey—the Ethiopian Socioeconomic Survey (ESS)—which were carried out in 2012, 2014, and 2016. The timing of the data collection was ideal to access the short- and medium-term impacts of rural roads that have been developed under the URRAP since 2010. In addition, the ESS represents a large part of rural Ethiopia, which allows this study to explore locational heterogeneity in the impacts of rural road development. Combining the road database and the ESS data, this study aims to estimate causal impacts by dealing with endogeneity due to nonrandom placement of rural roads. The primary strategy is a DID matching approach (Smith and Todd 2005), as used for the impact analysis of rural road access by Lokshin and Yemtsov (2005) and Mu and van de Walle (2011). Finally, this study analyzes one of the most relevant outcomes from a poverty reduction perspective: household consumption as a welfare measure.

The results of the econometric analysis suggest that Ethiopia’s recent rural road development has substantially increased household welfare, supporting households amid the recent severe droughts. It is estimated that rural roads increased household consumption by 16.1 percent between 2012 and 2016. In other words, thanks to the rural roads, households in connected communities increased consumption by 3.8 percent each year during the period. Moreover, households were less likely to fall into or remain in poverty when connected by all-weather roads in drought areas, indicating the mitigating role of rural roads for drought shocks. The study also finds the effects of rural road developments for agriculture and non-agriculture work in communities farther away from towns. More farmers have come to sell their crops once connected to rural roads. In addition, more households—particularly women and the youth—have engaged in wage jobs in remote communities. By connecting to markets, rural roads have widened the economic base in otherwise physically and economically isolated communities.

This study contributes to the literature on the impacts of rural road development. There is a small number of previous studies that evaluate the impacts of rural road development in the developing world.<sup>4</sup> Khandker, Bakht, and Koolwal (2009) examined the impact of road investments on poverty in Bangladesh, finding the overall effect of road improvement on household consumption to be about 8–10 percent in the project areas. By contrast, a recent study of India’s PMGSY program by Asher and Novosad (2018) finds no clear impact on household consumption and agricultural outcomes in connected villages.<sup>5</sup> Several studies investigate rural roads in Ethiopia. Dercon et al. (2009), using panel household surveys collected in selected villages between 1994 and 2004, found that access to all-weather roads reduced poverty by 6.9 percent and increased consumption growth

> 4 There are some other studies investigating the impacts of rural road access in the developing world. Jalan and Ravallion (2002) find positive impacts of rural roads on consumption growth in China. A study of Vietnam by Mu and van de Walle (2011) found positive impacts of rural road rehabilitation on local market development. Damania et al. (2016) found that transport cost reduction encourages farmers to adopt modern technologies in Nigeria.

> 5 Aggarwal (2018) finds lower prices, increased availability of non-local goods, increased use of agricultural technologies, and increased school enrollment among younger children in districts where the PMGSY program was implemented. Another study of the PMGSY by Shamdasani (2016) finds crop diversification among farmers in connected villages.

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