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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 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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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4484.

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Date of creation: 01 Jan 2008
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Handle: RePEc:wbk:wbrwps:4484

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Keywords: Transport Economics Policy&Planning; Rural Roads&Transport; Economic Theory&Research; Rural Transport;

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