DP16691 Urban Public Works in Spatial Equilibrium: Experimental Evidence from Ethiopia

Author(s): Girum Abebe, Simon Franklin, Clément Imbert, Carolina Mejia-Mantilla
Publication Date: November 2021
Date Revised: November 2021
JEL(s): I38, J61, O18, R23
Programme Areas: Labour Economics, Public Economics, International Trade and Regional Economics, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16691

This paper evaluates Ethiopia's Urban Productive Safety Net Program, which provides employment on local public works to the urban poor, and was rolled out randomly across neighborhoods of Addis Ababa. We find that the program increased public employment and reduced private labor supply among beneficiaries. We also show that it improved local amenities in treated locations, for both beneficiary and non-beneficiaries. We then develop a spatial equilibrium model and leverage unique data on commuting flows to quantify the effect of exposure to changes in labor supply from treated locations on labor markets across the city. Our estimates imply that once fully rolled out the program increased private wages by 18.6%. Finally, we use the model to compute the welfare gains to the poor: when we include the indirect effects on private wages and local amenities the welfare gains are four times larger than the direct benefits from public employment alone.