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The Role of Public Infraestructure in Market Development in Rural Peru

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  • Escobal, Javier

Abstract

This Study provides a conceptual framework to study the impact of rural infrastructure investment in market development and in the enhancement of income generating opportunities for the poor in rural Peru. The study uses descriptive methods and regression analysis together with relatively new impact evaluation techniques, like propensity score matching, to understand the causal paths through which the access to new or improved infrastructure services affect the livelihood strategies and livelihood outcomes of rural households. The data sources included in this study include regional time series data, several cross-section household level data sets coming from rural representative Living Standard Measurement Surveys; a household panel data set coming from the same source, together with specialized surveys developed by the author. The analysis shows that there are important complementarities in rural infrastructure investment. That is, even if any particular infrastructure investment (related to roads, electricity, telecommunication, water, or sanitation services) may be subject to diminishing returns, if done in isolation, this effect can be overcome if it is done in combination with other investments. In this way it is possible to get a sustained growth effect on rural incomes from infrastructure investment. The study shows that infrastructure investments reduce transaction costs and enhances the opportunities for spatial arbitrage, paving the way for improving market efficiency. However, the study warns that efficiency and equity gains may not occur simultaneously, because those that are better off in rural areas may obtain higher returns to infrastructure investments because of a larger private asset base or because of a better access to other public infrastructure.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 727.

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Date of creation: Apr 2005
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Handle: RePEc:pra:mprapa:727

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Keywords: Peru; rural infrastructure; poverty; economic geography; rural roads; impact evaluation; non-agricultural employment;

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  1. Haggblade, Steven & Hazell, Peter & Reardon, Thomas, 2010. "The Rural Non-farm Economy: Prospects for Growth and Poverty Reduction," World Development, Elsevier, Elsevier, vol. 38(10), pages 1429-1441, October.
  2. Ihle, Rico & von Cramon-Taubadel, Stephan, 2008. "A Comparison of Threshold Cointegration and Markov-Switching Vector Error Correction Models in Price Transmission Analysis," 2008 Conference, April 21-22, 2008, St. Louis, Missouri, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management 37603, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  3. Antonio Estache, 2010. "A survey of impact evaluations of infrastructure projects, programs and policies," Working Papers ECARES, ULB -- Universite Libre de Bruxelles 2010_005, ULB -- Universite Libre de Bruxelles.
  4. Reardon, Thomas & Pingali, Prabhu L. & Stamoulis, Kostas G., 2006. "Impacts of Agrifood Market Transformation during Globalization on the Poor's Rural Nonfarm Employment: Lessons for Rural Business Development Programs," Staff Papers, Michigan State University, Department of Agricultural, Food, and Resource Economics 11572, Michigan State University, Department of Agricultural, Food, and Resource Economics.

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