Roads are instrumental to market access. Electricity is a key technology for modern production. Both have been widely studied in isolation as potential drivers of development. In reality, infrastructure investments are commonly bundled. How such big push infrastructure investments interact in causing economic development, however, is not well understood. To this end, I first develop a spatial general equilibrium model to understand how big push infrastructure investments may affect structural transformation out of agriculture, a robust proxy for development. Second, tracking the large-scale all-weather road and electricity network expansions in Ethiopia over the last two decades, I present causal reduced-form evidence on how big push infrastructure investments generate markedly different patterns of structural transformation compared to isolated investments: I find that access to an all-weather road alone leads to a sizeable increase in services employment, at the expense of agriculture and manufacturing. Locations that additionally obtain electricity access, however, see large reversals in the employment share of manufacturing. Equipped with these reduced form moments, I leverage the spatial general equilibrium model to structurally estimate the implied welfare effects of big push infrastructure investments. Taking general equilibrium reverberations seriously, the structural estimates reveal that big push infrastructure investments increased welfare in Ethiopia by at least 11% compared to no investments, while isolated counterfactual road (electrification) investments would have increased welfare by only 2% (0.7%). Both structural and reduced-form findings highlight that interactions of infrastructure investments are in fact material to economic development.
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