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Migration, congestion externalities, and the evaluation of spatial investments

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  • Taryn Dinkelman
  • Sam Schulhofer-Wohl

Abstract

Evaluations of new infrastructure in developing countries typically focus on direct effects, such as the impact of an electrification program on household energy use. But if new infrastructure induces people to move into an area, other local publicly provided goods may become congested, offsetting the benefit of the infrastructure. We use a simple model to show how to measure the net benefit of a place-based program without data on land prices—an indicator that is commonly used to measure congestion in developed countries but that often cannot be used in poor countries because land markets are missing or land prices are badly measured. Our model shows that congestion externalities are especially large when land markets are missing. To illustrate, we estimate the welfare impact of a recent household electrification program in South Africa. Congestion externalities from migration reduced local welfare gains by half.

Suggested Citation

  • Taryn Dinkelman & Sam Schulhofer-Wohl, 2012. "Migration, congestion externalities, and the evaluation of spatial investments," Working Papers 700, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:700
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    References listed on IDEAS

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    Cited by:

    1. Klaus Desmet & Jordan Rappaport, 2013. "The settlement of the United States, 1800 to 2000: the long transition towards Gibrat's law," Research Working Paper RWP 13-02, Federal Reserve Bank of Kansas City.
    2. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779 Elsevier.
    3. repec:esx:essedp:729 is not listed on IDEAS

    More about this item

    Keywords

    South Africa;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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