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On measuring the benefits of lower transport costs

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  • Jacoby, Hanan G.
  • Minten, Bart

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.

Suggested Citation

  • Jacoby, Hanan G. & Minten, Bart, 2008. "On measuring the benefits of lower transport costs," Policy Research Working Paper Series 4484, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4484
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    More about this item

    Keywords

    Transport Economics Policy&Planning; Rural Roads&Transport; Economic Theory&Research; Rural Transport;
    All these keywords.

    JEL classification:

    • 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

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