Routes, Exports, and Employment in Developing Countries: Following the Trace of the Inca Roads *

Abstract

Domestic road infrastructure programs are often justified on the basis of their presumed positive effects on firms’ exports and accordingly on firms’ employment. In this paper we evaluate this policy claim for a developing country. In so doing, we take advantage of detailed geo-referenced data on firm-level trade and historical and current road infrastructure on Peru for the period 2003-2010. To identify the effects of interest we instrument recent changes in the road network with the pre-Columbian Inca road network. We find that improvements in transport infrastructure had a significant positive impact on firms’ exports and thereby on firms’ job growth –an increase of 6.4% and 5.1% in the average annual growth rate of exports and employment, respectively.