Effects of toll road construction on local road projects in Indonesia

Abstract

This study investigates the extent to which the construction of national toll roads in the Jakarta–Bandung region in Indonesia induces the development of local road projects nearby. In doing so, we disentangle the direct and indirect supply effects by considering the year of construction and urban development, respectively. We formulate four binary logit models to examine the direct and indirect relationships between toll road construction and local road projects. The dataset comprises 94 road projects planned or carried out between 2004 and 2016. We conduct interviews with local officials in the Jakarta–Bandung area to obtain data on the projects’ decision-making processes. Our modelling results show that existing and planned toll roads induce the development of local road projects both directly and indirectly. Local road projects tend to be developed in anticipation of the opening of a toll road. The changes in residential area and population around the toll roads also induce local road construction.