This research examines the impact of road construction on rural labor force outcomes in a
developing country. A new road built in the Republic of Palau links formerly inaccessible rural
areas to more urban wage sector employment. We use two censuses conducted five years
apart which perfectly bracket the road construction period. The data allow us to identify
households that moved in the intervening five year period, thereby correcting any
endogenous movement attributable to the road construction. Utilizing a difference-indifference
regression strategy and matched panel data, we find that households impacted by
the new road construction tend to increase their wage sector employment, decrease their
self-employment in agriculture, decrease the number of international migrants sent abroad
and increase their ownership of automobiles. The findings also show that inequality
decreases both within and between regions. The impact of road construction on average
household wages and income is negligible.