https://docs.google.com/spreadsheets/d/151TBORGP3sU5_y9u_GkFfyuokbSn2HpRQ6gnfh2rdsQ/edit?usp=sharing

Abstract

A large body of literature studies how infrastructure facilitates the movement of traded goods. We ask whether infrastructure also facilitates the movement of labor. We use a general equilibrium trade model and rich spatial data to explore the impact of a large plausibly exogenous shock to highways in Brazil on both goods markets and labor markets. We find that the road improvement increased welfare by 10.8%, of which 91% was due to reduced trade costs and 9% to reduced migration costs. Nevertheless, costly migration is responsible for large spatial heterogeneity in the benefits of roads: the interquartile range of welfare improvement is 5%-29%, as opposed to uniform gains with perfect mobility.