ically interdependent, we study the impact of regional integration and cross-border linkages when assessing the impact of future infrastructure investments. Currently, connectivity across the borders is poor due to a lack of road infrastructure, high border delays, and volatile security situations that make trade or transportation of goods too costly. The paper complements the analysis of key infrastructure investments with additional trade facilitation measures at the borders.

The paper is divided in two parts. The first part uses reduced-form analysis to quantify the impacts of past investments in electricity, internet, and road infrastructure on the structure of employment in Cameroon, Nigeria, and Chad over the past two decades. We show that major past infrastructure investments have had a large impact on the structure of the local economies. The second part uses a spatial general-equilibrium model, based on Moneke (2020), to assess the aggregate and spatial impacts of future infrastructure investments in the region. Reducedform results capture the localized effects in the areas that have been affected, but do not capture the general-equilibrium effects and spillovers due to the network nature of transport infrastructure. The general-equilibrium model captures the spillover effects that a localized investment has on the rest of the country and all the countries in the Lake Chad region and generates welfare estimates for the entire region and all its subregions.

We first provide evidence on how past investments and their combinations have impacted structural transformation in Cameroon, Nigeria, and Chad. Geo-identified data on the infrastructure expansion of roads and electricity for Cameroon, Nigeria, and Chad are collected over time and across space, and linked with information on local economic activity based on household-survey data. Two instrumental variables are developed to overcome the endogeneity concerns for road and electricity investments. Following Moneke (2020) and Gaggl et al. (2019), straight transmission lines connecting the main cities with newly opening hydropower dams in Cameroon and power plants in Nigeria are used for electrification, the construction of an hypothetical least-cost network expansion using a minimum spanning tree algorithm is used for road expansion. The paper finds different effects of bundled and isolated infrastructure investments on sectoral employment. Over the last two decades, our IV estimate shows that a combined access to electricity and paved roads led to a 22 percentage-point reduction in agricultural employment, benefiting mostly the services sector. This result is in line with similar work for the Horn of Africa (Herrera Dappe and Lebrand, 2021) and Ethiopia (Moneke, 2020).

As the pace of structural change remains slow in the region, we provide counterfactual evidence of the extent to which a push for more regional integration through the expansion of transport and trade infrastructure as planned by international donors as well as complementary investments in electrification would support economic development and structural transformation. There are several channels to be considered, hence the need for a structural model. Electricity investments increase labor productivity in the non-agricultural sector which can lead to more but also fewer workers in manufacturing or services if the productivity increase exceeds 3