Road Sector Development and Economic Growth in Ethiopia

Abstract

The study attempts to see the trends, stock of achievements, and impact of road network on economic growth in Ethiopia. To do so, descriptive and econometric analyses are utilized. From the descriptive analysis, the findings indicate that the stock of road network is by now growing at an encouraging pace. The government’s spending has reached tenfold relative to what it was a decade ago. It also reveals that donors are not following the footsteps of the government in financing road projects. The issue of rural accessibility still remains far from the desired target level that the country needs to have. Regarding community roads, both the management and accountancy is weak, even to analyze its impact. Thus, the country needs to do a lot to graduate to middle income country status in terms of road network expansion, community road management and administration, and improved accessibility. The econometric analysis is based on time series data extending from 1971‐2009. Augmented Cobb‐Douglas production function is used to investigate the impact of roads on economic growth. The model is estimated using a two‐step efficient GMM estimator. The findings reveal that the total road network has
significant growth‐spurring impact. When the network is disaggregated,  asphalt road also has a positive sectoral impact, but gravel roads fail to significantly affect both overall and sectoral GDP growth, including agricultural GDP. By way of recommendation, donors need to strengthen their support on road financing, the government needs to expand the road network with the aim of increasing the current rural accessibility, and more attention has to be given for community road management and accountancy. Lastly, gravel road expansion has to be made to meet the target level of the road network and simultaneously ascertain rural accessibility, thereby improving agricultural productivity and market access of the poor rural population.

Keywords: Road sector development, Stock of achievements, Impact on Overall and Sectoral Economic Growth, Two‐step GMM Estimation, Ethiopia