Urban Infrastructure and Economic Development: Experimental Evidence from Street Pavement
AbstractWe 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 InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5346.
Length: 54 pages
Date of creation: Nov 2010
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Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
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