Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 2020, Volume 88, Issue 5

Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua

https://doi.org/10.3982/ECTA15828
p. 1965-1997

Wyatt Brooks, Kevin Donovan

We measure the impact of increasing integration between rural villages and outside labor markets. Seasonal flash floods cause exogenous and unpredictable loss of market access. We study the impact of new bridges that eliminate this risk. Identification exploits variation in riverbank characteristics that preclude bridge construction in some villages, despite similar need. We collect detailed annual household surveys over three years, and weekly telephone followups to study contemporaneous effects of flooding. Floods decrease labor market income by 18 percent when no bridge is present. Bridges eliminate this effect. The indirect effects on labor market choice, farm investment, and savings are quantitatively important and consistent with the predictions of a general equilibrium model in which farm investment is risky, and households manage labor market risk and agricultural risk simultaneously. In the calibrated model, the increase in consumption‐equivalent welfare is substantially larger than the increase in income due to the ability to mitigate risk.


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Supplemental Material

Supplement to "Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua"

This zip file contains the replication files for the manuscript. There is also a supplementary appendix within the replication files with further results not found within the manuscript.

Supplement to "Eliminating Uncertainty in Market Access: The Impact of New Bridges in Rural Nicaragua"

This online appendix contains material not found within the manuscript.