Short-Run Market Access and the Construction of Better Transportation Infrastructure in Mexico

Abstract

We calculate the short-run effect that the construction of the Durango-Mazatlán highway in late 2013 and the Mexico City-Tuxpan highway in early 2014 produced on welfare in every municipality and on market access in every location of Mexico. Our estimates suggest that the former highway produced benefits not only in the region where the new highway is located, but in vast areas in the north of the country. Analogous estimates show that the latter highway mostly benefited regions near Tuxpan, but these focalized benefits were larger than any of the benefits derived from the construction of the Durango-Mazatlán highway. The municipalities in the south of the country have net short-run losses from the infrastructure construction due to losses in competitiveness. Our model is consistent with the observed sectoral growth in Sinaloa, Durango, and Veracruz in 2014. Qualitatively, market access and welfare change in the same direction and magnitudes. We thus recommend using the market access approach for short-run analysis of infrastructure, because it is much less computationally intensive.