over this time period than their counterparts elsewhere, suggesting that they found their existing arrangements sub-optimal once exposed to a wider choice set. At the same time, these firms became much less likely to report that transportation was a major obstacle to production than had been the case prior to the implementation of the project.

Ghani et al (2016) study the impact of transport infrastructure on the organization of manufacturing activity and find that the Golden Quadrilateral upgrades led to a substantial increase in manufacturing activity. This growth included higher entry rates, improvements to incumbent productivity, and adjustments in the spatial sorting of industries, and improved allocative efficiency in manufacturing industries initially located along the GQ network. The largest growth in manufacturing activity was found in districts located within 10 kilometers from the GQ highway, where output levels grew by 49 percent over the decade after construction began. Such growth was not observed in districts located 10 – 50 kilometers from the GQ network, nor in districts adjacent to another major Indian highway system scheduled for a contemporaneous upgrade that was subsequently delayed.

Finally, highway infrastructure investments also promote competition in the marketplace by disrupting monopsony power. Brooks et al (2021) find that the monopsony power of Indian manufacturing firms in labor markets is reduced among firms near newly constructed highways relative to firms that remain far from highways. The impacts of highway construction are procompetitive in both output and input markets, increasing labor’s share of income by about 1.8 to 2.3 percentage points.

**Table 11: Survey of selected papers on the development impact of trunk road investments in China and India**

|**Author**|**Level of**<br>**Analysis**|**Country/**<br>**Region**|**Indicator of**<br>**Development**|**Main Findings**|
|---|---|---|---|---|
|Egger et al<br>(2020)+|Prefecture|China|Output,<br>Population|Trunk (and other) infrastructure upgrades promote long-run convergence of<br>lagging regions, in terms of population and to a lesser extent income.|
|Faber<br>(2014)*+|County|China|Output|Localities incidentally benefiting from National Trunk Highway System experienced<br>18% GDP growth in 9-years, while peripheral localities saw industrial decline.|
|Baum-Snow<br>et al (2020)|Prefecture|China|Output,<br>Population|Better regional highways shift population towards regional primate cities, and<br>accentuate industrial specialization, while hinterland becomes more agricultural.|
|Roberts et al<br>(2012) *|Sector|China|Income,<br>Inequality|China’s National Trunk Highway System boosted aggregate real income by 6%<br>(unadjusted for opportunity cost) and drove convergence of lagging inland regions.|
|Cosar &<br>Fajgelbaum<br>(2016) *|Prefecture|China|Jobs|Economic activity and industry export orientation at the industry-prefecture level is<br>strongly correlated with proximity to coastlines.|
|Ghani et al<br>(2016) *+|County|India|Firm<br>production|Localities within 10kms of India’s GQ Highway saw a large rise in manufacturing,<br>driven by firm entry, productivity growth and more efficient spatial sorting.|

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