in Table 10). However, further analysis of heterogeneity suggest that rural road developments profoundly reduced the chance of facing food insecurity in remote areas.<sup>21</sup> The estimated welfare impacts of rural roads are robust against the measure of drought shock. How to identify households/areas affected by droughts is not straightforward. As explained, this study uses an NDVI-based drought exposure indicator. As a robustness check, six dummy variables are created based on different thresholds (z-scores lower than 0, −0.5, or −1.0) and interacted with rural road indicators in estimating the DID matching models to assess how the impacts of rural roads on household consumption change, depending on the degree of abnormalities in vegetation. Except for the extreme threshold (−1.0), the estimated impacts of rural roads on household consumption are not substantially different from the baseline with the threshold being zero (Table A2 in the Appendix).

Moreover, the estimated impacts above do not substantially change when other matching methods are applied. Table A3 in the Appendix summarizes the results based on nearest neighbor matching (one-to-one matching). Overall, the estimated impacts on household consumption are larger than those based on kernel matching. Regardless of setting caliper (row A) or not (row B), the results demonstrate that rural roads increased household consumption by about 20 percent between 2012 and 2016.

# **6. Conclusion**

This study attempts to assess the impacts of recently developed rural roads on household welfare and economic activities. The panel data sets of both household surveys, which include detailed household consumption information, and transport networks make it possible to relate the development of rural roads to welfare changes across space and over time. Moreover, the study period between 2010 and 2016 incorporates both the launching and development of a large-scale rural road development program (URRAP) and historically severe droughts, which allows it to analyze the contribution of rural roads to resilience against disaster shocks.

The study finds that recently developed rural roads have brought significant welfare and economic impacts for rural Ethiopians who would have otherwise been physically and economically isolated. Amid the recent severe droughts, rural roads played a fundamental role in reducing poverty and enhancing resilience against shocks by providing rural populations access to markets.

Rural roads supported household welfare amid the recent severe drought shocks. The econometric analysis of this study suggests that recent rural road development contributed to household welfare, which is measured by household consumption. Rural roads increased household consumption by 3.8 percent each year between 2012 and 2016. In other words, without the rural roads, the average household consumption would have been 16.1 percent lower between 2012 and 2016. The estimated impacts mainly come from rural households who were affected by the recent severe droughts, which indicates the contribution of rural roads to reducing vulnerability and enhancing resilience against disaster shocks. Rural households in the most remote communities benefited most from rural road development. Importantly, poorer people gained more from recently developed rural roads: without rural roads, 10 percent more households would have been poor.

> 21 Not reported. Results available upon request. Recipient indicators for PSNP and other transfers are added as controls.

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