Road to division: Ethnic favoritism and road infrastructure in Ethiopia

This paper investigates the role of ethnic favoritism in the long run allocation of road infrastructure in Ethiopia. I construct a 5 km 2 grid cell panel by merging road network data from the late 1960s to 2016 with high resolution maps of local ethnic composition. Using a quasi-experimental empirical design, the study finds that cells where the local majority shares the ethnicity with the ruling elite receive 8.7 percent additional road investments and see a 13.8 improvement in road surface quality than otherwise comparable non co-ethnic cells. Exploiting the phased rollout of the Road Sector Development Program between 1997 and 2016, I also document that new roads raise night lights intensity by 0.27 standard deviations in cells benefiting from the program and by 0.51 standard deviations in co-ethnic areas, with larger effects for earlier investments. These findings suggest that ethnic alignment and the availability of large public funds jointly shape the placement of road infrastructure, influencing local economic dynamics. • In Ethiopian roads projects, areas co-ethnic with the government see more investments. • Ethiopian infrastructural investments involve discretionary political allocation. • Ethnic favoritism in Ethiopia peaks in federal roads, where discretion is widest. • In Ethiopia, infrastructure gains bring strong improvements in local development.