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Agriculture remains an important economic sector in Africa, employing a large share of the labor force and earning foreign exchange. Among others, transport connectivity has long been a crucial constraint in Africa. In theory, railways have a particularly important role to play in shipping freight and passengers at low cost. However, most African railways were in virtual bankruptcy by the 1990s. Using a large sample of data comprised of more than 190,000 households over eight years in Ethiopia, the paper estimates the impacts of rail transport on agricultural production. Methodologically, the paper takes advantage of the historical event that a major rail line connecting the country to the regional hub, the Port of Djibouti, was abandoned in the 2000s. With spatially highly disaggregated fixed effects and instrumental variables incorporated, an agricultural production function is estimated. The elasticity with respect to port connectivity is estimated at 0.276. The use of fertilizer is also found to increase with transport cost reduction, supporting the fact that a large amount of fertilizer is imported to Ethiopia.

Agriculture Production --- Transport Infrastructure

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Spatial analysis in economics is becoming increasingly important as more spatial data and innovative data mining technologies are developed. Even in Africa, where data often crucially lack quality analysis, a variety of spatial data have recently been developed, such as highly disaggregated crop production maps. Taking advantage of the historical event that rail operations were ceased in Ethiopia, this paper examines the relationship between agricultural production and transport connectivity, especially port accessibility, which is mainly characterized by rail transport. To deal with endogeneity of infrastructure placement and autocorrelation in spatial data, the spatial autocorrelation panel regression model is applied. It is found that agricultural production decreases with transport costs to the port: the elasticity is estimated at -0.094 to -0.143, depending on model specification. The estimated autocorrelation parameters also support the finding that although farmers in close locations share a certain common production pattern, external shocks, such as drought and flood, have spillover effects over neighboring areas.

Agriculture Production --- Spatial Autoregressive Model --- Transport Infrastructure

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