On Measuring the Benefits of Lower Transport Costs

Download or read book On Measuring the Benefits of Lower Transport Costs written by Hanan G. Jacoby and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.