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Urban Infrastructure and Economic Development: Experimental Evidence from Street Pavement

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Author Info

  • Gonzalez-Navarro, Marco

    ()
    (University of California, Berkeley)

  • Quintana-Domeque, Climent

    ()
    (University of Oxford)

Abstract

We design an infrastructure experiment in Mexico to evaluate the impact of street pavement on housing values and household outcomes. We find that the provision of street pavement raises housing values by 16% and land values by 54%, according to professional appraisals. Using homeowner valuations, we estimate the impact of pavement on housing values to be 25%. At the household level, street paving increased the use of collateral-based credit and average loan size. Additionally, among households on paved streets vehicle ownership went up by 40%, while the number of durable goods augmented by 12% as a result of pavement. We provide compelling evidence that the mechanism explaining the durable goods increase is the credit channel: the raise in durable goods as well as in credit use was only present among households with access to financial services at baseline. This suggests that increments in the value of collateral are not sufficient to expand credit use in this context. Access to the financial sector is necessary for street pavement to be reflected in higher consumption of durable goods. Finally, we estimate the private gains to land plots on paved streets to be 109% of construction costs, which can have important implications for urban infrastructure financing.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5346.

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Length: 54 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5346

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Keywords: randomized controlled trial; street pavement; home values; durable goods; credit;

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References

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  1. Climent Quintana & Marco González, 2008. "The reliability of self-reported home values in a developing country context," Working Papers. Serie AD 2008-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Van de Walle, Dominique, 2000. "Choosing rural road investments to help reduce poverty," Policy Research Working Paper Series 2458, The World Bank.
  3. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 118(3), pages 485-535, 06.
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Cited by:
  1. Christian Seiler & Klaus Wohlrabe, 2011. "Ranking Economists on the Basis of Many Indicators: An Alternative Approach Using RePEc Data," CESifo Working Paper Series 3691, CESifo Group Munich.
  2. Christian Seiler & Klaus Wohlrabe, 2011. "Ranking Economists and Economic Institutions Using RePEc: Some Remarks," Ifo Working Paper Series Ifo Working Paper No. 96, Ifo Institute for Economic Research at the University of Munich.

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