Abstract

This paper studies the effects of a large reduction in transport costs on agricultural development in a developing country, with a focus on the interactions among the comparative advantage and transport costs of a location, and the transport intensity and value of a commodity. The paper extends the von Thunen model of land allocation to incorporate costly technology adoption and comparative advantage based on land productivity. The theoretical analysis predicts spatial non-linearity in cropland allocation. A reduction in transport costs leads to adoption of productivity-enhancing inputs in the newly-connected region, and an increase in the share of land devoted to the high-value transport-intensive crop. The strongest effect is felt in areas that are not too near or too far from the center and have a higher land productivity in transport intensive crop. The empirical context of the analysis is the Jamuna bridge in Bangladesh, which opened in 1998 and reduced the transport costs from the poor hinterland in the northwest to the capital city (Dhaka) by more than 50 percent. Using sub-district level panel data, the paper implements doubly robust estimators in a difference-in-difference design. The analysis finds that the construction of Jamuna bridge led to increased adoption of technology (fertilizer, irrigation, greenness, and cropping intensity) and reallocation of land from low-value and nonperishable rice to high-value crops, pulses, and vegetables. The evidence indicates spatial nonlinearity in the effects on cropping intensity and the reallocation of land in areas with comparative advantage in vegetable production. For cropping intensity, the magnitude of the effect is large in the intermediate distance (130-150 kilometers) from the bridge. In areas with relatively higher vegetable productivity, land allocated to rice declined, and land was reallocated from high-yielding variety rice to vegetables in the intermediate distance (110-150 kilometers). This improved productive efficiency by aligning the cropping pattern more closely with comparative advantage. The bridge thus led to agricultural development through technology adoption, higher cropping intensity, and reducing the spatial mismatch between land suitability and crop choice. Document type: Book