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On measuring the benefits of lower transport costs

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Author Info
Jacoby, Hanan G.
Minten, Bart

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

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  1. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank. [Downloadable!]
  2. Arnott, Richard J & Stiglitz, Joseph E, 1981. "Aggregate Land Rents and Aggregate Transport Costs," Economic Journal, Royal Economic Society, vol. 91(362), pages 331-47, June. [Downloadable!] (restricted)
    Other versions:
  3. 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. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. Gersovitz, Mark, 1989. "Transportation, State Marketing, and the Taxation of the Agricultural Hinterland," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1113-37, October. [Downloadable!] (restricted)
  6. Jacoby, Hanan C, 2000. "Access to Markets and the Benefits of Rural Roads," Economic Journal, Royal Economic Society, vol. 110(465), pages 713-37, July. [Downloadable!] (restricted)
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  7. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. Marcel Fafchamps & Forhad Shilpi, 2003. "The spatial division of labour in Nepal," The Journal of Development Studies, Taylor and Francis Journals, vol. 39(6), pages 23-66, January. [Downloadable!] (restricted)
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  10. Khandker, Shahidur R. & Bakht, Zaid & Koolwal, Gayatri B., 2006. "The poverty impact of rural roads : evidencefrom Bangladesh," Policy Research Working Paper Series 3875, The World Bank. [Downloadable!]
  11. 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.
  12. Marcel Fafchamps & Forhad Shilpi, 2005. "Cities and Specialisation: Evidence from South Asia," Economic Journal, Royal Economic Society, vol. 115(503), pages 477-504, 04. [Downloadable!] (restricted)
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  13. Marcel Fafchamps & Ruth Vargas Hill, 2005. "Selling at the Farmgate or Traveling to Market," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 87(3), pages 717-734, 08. [Downloadable!] (restricted)
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