Promoting pro-poor growth through infrastructure investment: Evidence from the Targeted Poverty Alleviation program in China

This paper empirically estimates the effects of infrastructure investments on the level and distribution of impoverished households' income, utilizing the arguably exogenous investment shock from the Targeted Poverty Alleviation program in China. We focus on the agricultural income of poor rural households. We also examine whether these infrastructure investments increase or decrease income inequality within the impoverished group. We distinguish among different types of infrastructure investment, aiming to identify the investments effective in promoting growth in agricultural income, especially for the poorest. Based on a comprehensive household-level administrative dataset and econometric analysis, we find that electricity infrastructure significantly increases poor households' agricultural income and that the income benefit is equally distributed among the poor; agricultural irrigation infrastructure raises agricultural income significantly and delivers more benefit to the poorest households. An examination of the mechanism shows that both electricity and irrigation infrastructure increase the probability of participating in agricultural work and therefore increase agricultural income. These findings imply that, through increasing the utilization of agricultural land and the labor of impoverished households, electricity and irrigation infrastructure investments in rural impoverished areas are likely to lead to pro-poor and sustainable development.