Rural road connectivity and local economic Activity: Evidence from Sri Lanka's iRoad program.

A large portion of the world's rural population has limited access to paved roads, which is widely believed to constrain rural economic growth opportunities. Using a panel of nighttime lights and road placement data from the Integrated Road Investment Program (iRoad), a large-scale rural road development program in Sri Lanka, this study examines the relationship between rural road connectivity and local nighttime luminosity. The program was found to result in better and more consistent rural road conditions. Rural areas with improved connectivity after two years show higher local nighttime luminosity, a proxy for economic activity, compared to areas without connectivity. These gains hold even for indirectly targeted rural areas where the iRoad passes through. The gains vary spatially, which are most pronounced in areas at a moderate distance to socioeconomic centers and with more adequate complementary infrastructure provisions. These findings support the notion that improving rural connectivity can ease development constraints, increase resilience in managing negative economic shocks caused by the COVID-19 pandemic, and contribute to post-pandemic economic recovery. The findings also lend to the idea that targeted placements based on the beneficiary's location and complementary infrastructure (e.g., educational and medical facilities) can enhance the effectiveness of rural road investments. An intensive margin analysis suggests that post-construction maintenance is effective in bringing about sustained impact. • Using data from a large-scale rural road program in Sri Lanka, we study the relationship between rural connectivity and local economic activity. • The rural road program was found to result in better and more consistent rural road conditions. • Rural areas with improved connectivity after two years show higher local nighttime luminosity compared to areas without connectivity. • The gains vary spatially, which are most pronounced in areas at a moderate distance to socioeconomic centers and with more complementary infrastructure. • The findings lend to the idea that targeted placements can enhance the effectiveness of rural road investments. [ABSTRACT FROM AUTHOR]