Urban Public Works in Spatial Equilibrium: Experimental Evidence from Ethiopia

Anti-poverty programs affect not only beneficiaries but also the entire economy, through spillover effects which are often difficult to identify and quantify. This paper evaluates Ethiopia’s Urban Productive Safety Net Program, which provides employment on local public works to the urban poor. For identification, we use the random roll-out of the program across neighborhoods of Addis Ababa. We develop a spatial equilibrium model and leverage unique data on local amenities and city-wide commuting flows to account for spillover effects. We show that the program increases public employment, improves local amenities, and reduces private labor supply in program neighborhoods. We then estimate the effect of the program on labor markets across the city: we find that wages increased by 15% in program neighborhoods and 3% in other neighborhoods. Finally, we compute the welfare gains to the poor from the program once fully rolled-out: 26% come from public employment, 12% from improvements in local amenities and 62% from rising private-sector wages. These results suggest that welfare gains are four times larger after taking spillover effects into account. ∗Franklin: Queen Mary University London, s.franklin@qmul.ac.uk. Imbert: University of Warwick, BREAD, CEPR, EUDN and JPAL, c.imbert@warwick.ac.uk. Abebe: World Bank. Mejia-Mantilla: World Bank. We would like to thank Stefano Caria, Morgan Hardy, Emanuela Galasso, Ruth Hill, Seema Jayachandran, Gabriel Kreindler, Karthik Muralidharan, Paul Niehaus, Michael Peters, Barbara Petrongolo, Debraj Ray, Marta Santamaria, Gabriel Ulyssea, Eric Verhoogen, Christina Wieser, Yanos Zylberberg, as well as participants at various seminars and conferences for their comments. All remaining errors are ours.