The paper
This paper combines a detailed road network database with a gravity model to examine trade across Europe and Central Asia. It shows why infrastructure investment in a transit country can generate substantial benefits for its neighbors.
Research findings
- The road-upgrade simulations produce large increases in intra-regional trade, with important spillovers through overland transit routes.
- Targeting a small number of key transit countries captures a large share of the modeled region-wide trade gains at lower cost than upgrading the entire network.
Policy takeaways
- Evaluate road projects using regional trade benefits, including gains accruing outside the country making the investment.
- Coordinate corridor investments and consider shared financing when cross-border spillovers are substantial.