Road networks and enterprise performance in Ethiopia: Evidence from the road sector development programme

Poor infrastructure and high transport costs are among the major constraining factors for Africa’s global competitiveness and economic growth (World Bank 2009, Bloom and Sachs 1998). Transport costs in Africa are indeed among the highest in the developing world. Recently, many African countries have begun to address this problem through large-scale investment programmes in infrastructure. Existing studies associate improvements in transport networks with a range benefits including poverty reduction, international competitiveness and economic growth (Banerjee et al. 2012, Hendersen 2000, Buys et al. 2010). More explicitly, lower transport costs imply improved market access for firms, economies of scale and integration across geographic locations (Lall et al. 2004, Graham 2007, Holl 2006, 2011). Reduced transport costs may also lower input prices, facilitate access to specialised labour, and promote agglomeration economies. It is through these channels that the quality of transport infrastructure is likely to affect enterprise performance.