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On measuring the benefits of lower transport costs, Volume 1
 
Author:Jacoby, Hanan G.; Minten, Bart; Country:World;
Date Stored:2008/01/22Document Date:2008/01/01
Document Type:Policy Research Working PaperSubTopics:Rural Roads & Transport; Transport Economics Policy & Planning; Economic Theory & Research; Rural Transport;
Language:EnglishRegion:The World Region
Report Number:WPS4484Collection Title:Policy Research working paper ; no. WPS 4484
Volume No:1  

Summary: 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.

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