Using Satellite Imagery to Detect the Impacts of New Highways: An Application to India

This paper integrates daytime and nighttime satellite imagery into a spatial general-equilibrium model to evaluate the returns to investments in new motorways. Our approach has particular value in developing-country settings in which granular data on economic activity are scarce. To demonstrate our method, we use multi-spectral imagery—publicly available across the globe—to evaluate India’s varied road construction projects in the early 2000s. Estimating the model requires only remotely-sensed data, while evaluating welfare impacts requires one year of population data, which are increasingly available through public sources. We find that India’s road investments from this period improved aggregate welfare, particularly for the largest and smallest urban markets. The analysis further reveals that most welfare gains accrued within Indian districts, demonstrating the potential benefits of using of high spatial resolution of satellite images.