Urban Public Works in Spatial Equilibrium: Experimental Evidence from Ethiopia (with S. Franklin, G. Abebe and C. Mejia-Mantilla

Category: Quantitative Economic Policy Seminar
When: 24 June 2021
, 14:00
 - 15:15
Where: Online (please contact wais@econ.uni-frankfurt.de for zoom link)

Anti-poverty programs affect not only beneficiaries but also the entire economy, through spillover effects which are often difficult to identify and quantify. This paper evaluates Ethiopia's Urban Productive Safety Net Program, which provides employment on local infrastructure projects to poor households. For identification, we use the random roll-out of the program across neighborhoods of Addis Ababa. We develop a spatial equilibrium model and leverage unique data on local amenities and city-wide commuting flows to account for spillover effects. We first show that, as compared to other neighborhoods, neighborhoods with the program saw public employment increase and local amenities improve, but also private employment decrease.  We then use a model-based measure of exposure to estimate the effect of the program on private sector earnings, which were felt across the city: wages increased by 15.3% in program neighborhoods and 3.3% in other neighborhoods.  Finally, we compute the welfare gains to the poor once the program was completely rolled out across neighborhoods: 64% come from rising private-sector wages, 12% from improvements in local amenities, and only 24% from public employment.  These results suggest that welfare gains are four times larger after taking spillover effects into account.