Highways and Spatial Development

This Economic Premise examines the link between highways and spatial development. The Golden Quadrilateral (GQ) highway project in India—5,846 km of highways linking four major urban hubs—improved the connectivity and market accessibility of districts close to the highway compared to those more removed. Non-nodal districts located within 0–10 km from the highway experienced substantial increases in entry of new enterprises. The highways facilitated a more natural sorting of industries that are land and building intensive, improved efficiency in the manufacturing industries, and encouraged decentralization of urban transformation by making intermediate cities more attractive. Understand-ing these patterns is important for policy makers, because well-targeted infrastructure projects can improve resource reallocation, accelerate spatial development, and also promote shared prosperity. Adequate transportation infrastructure is an essential ingre-dient for economic development and growth. Beyond simply facilitating cheaper and more efficient movement of goods, people and ideas across places, transportation infrastructure impacts the distribution of economic activity and develop-ment across regions to the extent that agglomeration econo-mies and efficient sorting can be realized, the levels of compe-tition among industries and concomitant reallocation of inputs toward productive enterprises are achieved, and much more. Rapidly expanding countries like India and China of-ten face severe constraints in terms of their transportation infrastructure. Many business leaders, policy makers, and aca-demics report inadequate infrastructure as a critical obstacle to sustained growth that must be resolved with public fund-ing—but to date, there is limited understanding of the eco-nomic impact of those infrastructure projects. This note summarizes the main findings of the study conducted by Ghani, Goswami, and Kerr (2013) on the im-pact of the GQ project on organized manufacturing in In-dia. The GQ project sought to improve the connection of four major cities in India: Delhi, Mumbai, Chennai, an