On measuring the benefits of lower transport costs |
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Authors: | Hanan G Jacoby Bart Minten |
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Institution: | 1. Development Research Department, World Bank, 1818 H Street NW, Washington DC, 20433, United States;2. International Food Policy Research Institute, New Delhi, India |
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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 $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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Keywords: | O12 Q12 H43 |
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