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On measuring the benefits of lower transport costs

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  • Jacoby, Hanan G.
  • Minten, Bart

Abstract

Despite large amounts invested in rural roads in developing countries, little is known about their benefits. This paper derives an expression for the willingness-to-pay for a reduction in transport costs from the canonical agricultural household model and uses it to estimate the benefits of a hypothetical road project. Estimation is based on novel cross-sectional data collected in a small region of Madagascar with enormous, yet plausibly exogenous, variation in transport cost. A road that essentially eliminated transport costs in the study area would boost the incomes of the remotest households - those facing transport costs of about $75/ton - by nearly half, mostly by raising non-farm earnings. This benefit estimate is contrasted to one based on a hedonic approach.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 89 (2009)
Issue (Month): 1 (May)
Pages: 28-38

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Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:28-38

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Transport costs Welfare measurement Rural infrastructure Agricultural household models;

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References

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  5. Scotchmer, Suzanne, 1986. "The short-run and long-run benefits of environmental improvement," Journal of Public Economics, Elsevier, vol. 30(1), pages 61-81, June.
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  8. Fafchamps, Marcel & Shilpi, Forhad, 2002. "The spatial division of labor in Nepal," Policy Research Working Paper Series 2845, The World Bank.
  9. Bartik, Timothy J. & Smith, V. Kerry, 1987. "Urban amenities and public policy," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 31, pages 1207-1254 Elsevier.
  10. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 717-734.
  11. Mitchell Polinsky, A. & Shavell, Steven, 1976. "Amenities and property values in a model of an urban area," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 119-129.
  12. Jacoby, Hanan G., 1998. "Access to markets and the benefits of rural roads," Policy Research Working Paper Series 2028, The World Bank.
  13. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank.
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  15. Gibson, John & Rozelle, Scott, 2003. "Poverty and Access to Roads in Papua New Guinea," Economic Development and Cultural Change, University of Chicago Press, vol. 52(1), pages 159-85, October.
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Citations

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Cited by:
  1. Khandker, Shahidur R. & Koolwal, Gayatri B., 2011. "Estimating the long-term impacts of rural roads : a dynamic panel approach," Policy Research Working Paper Series 5867, The World Bank.
  2. Minten, Bart & Reardon, Thomas & Vandeplas, Anneleen, 2009. "Linking urban consumers and rural farmers in India: A comparison of traditional and modern food supply chains," IFPRI discussion papers 883, International Food Policy Research Institute (IFPRI).
  3. LEFÈVRE, Mélanie & THARAKAN, Joe & ,, 2013. "Intermediaries, transport costs and interlinked transactions," CORE Discussion Papers 2013055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Raballand, Gael & Macchi, Patricia & Merotto, Dino & Petracco, Carly, 2009. "Revising the roads investment strategy in rural areas : an application for Uganda," Policy Research Working Paper Series 5036, The World Bank.
  5. David Stifel & Marcel Fafchamps & Bart Minten, 2009. "Taboos, agriculture and poverty," CSAE Working Paper Series 2009-15, Centre for the Study of African Economies, University of Oxford.
  6. Yamauchi, Futoshi & Dewina, Reno, 2012. "Risks and spatial connectivity evidence from food price crisis in rural Indonesia," Food Policy, Elsevier, vol. 37(4), pages 383-389.
  7. Zhigang Li & Xiaohua Yu & Yinchu Zeng & Rainer Holst, 2012. "Estimating transport costs and trade barriers in China: Direct edvidence from Chinese agricultural traders," Working Papers 1209, BBVA Bank, Economic Research Department.
  8. Qin, Yu & Zhang, Xiaobo, 2012. "Road to Specialization in Agricultural Production: Evidence from Rural China," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126455, International Association of Agricultural Economists.
  9. Li, Zhigang & Yu, Xiaohua & Zeng, Yinchu, 2011. "Estimating the impact of transport efficiency on trade costs: Evidence from Chinese agricultural traders," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114384, European Association of Agricultural Economists.
  10. Monica Beuran & Marie Castaing Gachassin & Gaël Raballand, 2013. "Are There Myths on Road Impact and Transport in Sub-Saharan Africa?," Documents de travail du Centre d'Economie de la Sorbonne 13049, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  11. Bell, Clive & van Dillen, Susanne, 2012. "How does India's rural roads program affect the grassroots ? findings from a survey in Orissa," Policy Research Working Paper Series 6167, The World Bank.
  12. Marie-Francoise Calmette & Maureen Kilkenny, 2012. "Rural roads versus African famines," The Annals of Regional Science, Springer, vol. 49(2), pages 373-396, October.
  13. Sawada, Yasuyuki & Shoji, Masahiro & Sugawara, Shinya & Shinkai, Naoko, 2009. "The Role of Infrastructure in Mitigating Poverty Dynamics: The Case of an Irrigation Project in Sri Lanka," 2009 Conference, August 16-22, 2009, Beijing, China 51461, International Association of Agricultural Economists.
  14. Minten, Bart & Tamru, Seneshaw & Engida, Ermias & Kuma, Tadesse, 2013. "Using evidence in unraveling food supply chains in Ethiopia: The supply chain of teff from major production areas to Addis Ababa:," ESSP working papers 54, International Food Policy Research Institute (IFPRI).
  15. Christian K.M. Kingombe & Salvatore di Falco, 2012. "Labour Market and Fiscal Policy," IHEID Working Papers 04-2012, Economics Section, The Graduate Institute of International Studies, revised 28 Feb 2012.
  16. Bell, Clive, 2012. "Estimating the social profitability of India's rural roads program : a bumpy ride," Policy Research Working Paper Series 6168, The World Bank.
  17. Sellamuttu, Sonali Senaratna & Aida, Takeshi & Kasahara, Ryuji & Sawada, Yasuyuki & Wijerathna, Deeptha, 2013. "How Access to Irrigation Influences Poverty and Livelihoods:A Case Study from Sri Lanka," Working Papers 59, JICA Research Institute.
  18. Santos, Georgina & Behrendt, Hannah & Teytelboym, Alexander, 2010. "Part II: Policy instruments for sustainable road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 46-91.
  19. Ulimwengu, John & Funes, Jose & Headey, Derek & You, Liangzhi, 2009. "Paving the way for development?: The impact of transport infrastructure on agricultural production and poverty reduction in the Democratic Republic of Congo," IFPRI discussion papers 944, International Food Policy Research Institute (IFPRI).

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