Rural Roads, Agricultural Extension, and Productivity

Low agricultural productivity is a persistent challenge for developing economies. Two policy innovations that have attracted significant attention include the expansion of rural roads and agricultural extension services that facilitate access to technologies and inputs. However, the studies that examine each of these policies in isolation provide mixed evidence on their effectiveness. This paper shows that it is important to consider roads and extension simultaneously due to the strong complementarities between the two factors. I study the concurrent but independently implemented expansion of rural roads and extension in Ethiopia to examine how access to markets and technologies affect productivity when available in isolation and together. Using geo-spatial data combined with large surveys and exploiting the staggered roll-out of the two programs, I show that there are strong complementarities between roads and extension. While ineffective in isolation, access to both a road and extension increases productivity by 11%. I find that roads and extension improve productivity by facilitating the take up of agricultural advice, credit and modern inputs such as chemical fertilizers. Furthermore, households adjust crop choices and shift across occupations in response to their changing comparative advantages in access to markets and technologies. Overall, while extension and roads increase farm income on average, the gains are concentrated in the villages that have access to both factors.