On measuring the benefits of lower transport costs
AbstractDespite 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 USD 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 InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4484.
Date of creation: 01 Jan 2008
Date of revision:
Transport Economics Policy&Planning; Rural Roads&Transport; Economic Theory&Research; Rural Transport;
Other versions of this item:
- Jacoby, Hanan G. & Minten, Bart, 2009. "On measuring the benefits of lower transport costs," Journal of Development Economics, Elsevier, vol. 89(1), pages 28-38, May.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-02-02 (Agricultural Economics)
- NEP-ALL-2008-02-02 (All new papers)
- NEP-URE-2008-02-02 (Urban & Real Estate Economics)
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