National Road Upgrading and Structural Transformation: Evidence from Ugandan Households

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Structural transformation, typically characterized by labor transitioning from agriculture to a diverse industrial economy, has been slow in Sub-Saharan Africa. Even though the region is urbanizing, a significant portion of the urban population continues to depend on agriculture. We argue that this is due to smaller cities being isolated from national markets and trade. We test this claim using granular individual panel data and Uganda's doubling of paved roads, which improved remote areas' market access. We find that enhanced market access causes workers to quit family farms for specialized paid employment. The effects are concentrated in peripheral areas, households with a comparative advantage in off-farm work, reflecting off-farm opportunities rather than a reduced demand for farm output. In addition, market access leads remote households to simplify farming techniques and scale back farming. Findings are consistent with reliable transport allowing trade with major markets, creating opportunities to specialize according to individual comparative advantage.