The (Fiscal) Dividend of Infrastructure : Roads and Revenues in Rwanda

This paper shows that infrastructure investments enhance local tax outcomes.

This paper shows that infrastructure investments enhance local tax outcomes. The analysis draws on a novel dataset combining information on the location and timing of all road upgrades in Rwanda with 12 years of administrative tax and census records, it estimates large and significant increases in tax revenues in municipalities near upgraded roads. These effects are driven by firm entry as well as land value appreciation, captured through taxes on rental income at the local level. Finally, the paper shows that although the additional revenues do not fully recover the central government’s initial investment, local municipalities’ revenues more than double within five years following the upgrades.