Reproducibility package for Local Infrastructure and the Development of the Private Sector: Evidence from a Randomized Trial

We study how local public infrastructure investment affects neighborhood economies. By tracking the impacts of US$68 million of randomized investments in Mexican municipalities, we document how government investment leads to sustained increases in the size and profitability of treated private-sector companies. Initially, wages rise to compensate for higher costs of living, inefficient firms die, and more efficient firms grow faster. Over the subsequent decade treated firms increase their capital stocks and revenues, suggesting durable improvements in the structure of the local economy. Our results provide novel evidence of linkages between government investment, business growth, and the dynamics of local economies.