Principal investigator: Eduarda Miller de Figueiredo
Article title: DO RURAL ROADS CREATE PATHWAYS OUT OF POVERTY? EVIDENCE FROM INDIA
Author of the article: Shilpa Aggarwal
Location of the intervention: India
Sample size: 562 districts
Sector: Others
Type of intervention: Effects of road construction
Variables of interest: Prices of goods, consumer baskets, technology adoption, and human capital.
Evaluation method: Differences in Differences
Policy Problem
Poor transport infrastructure limits access to markets and public services for residents of developing countries (World Bank, 2007; 2009). The Indian government seeks to address this problem through the program. Prime Minister's Village Road Program (PMGSY)[1] Launched in late 2000, it aims to bring all villages with a population of at least 500 people closer to the market via a paved road.
While the literature is largely concerned with how roads facilitate the movement of goods, the impact on mobility is potentially far-reaching and can facilitate more than just trade. For example, with easy access to labor markets and government services, there could be an impact on human capital, occupational choices, and income levels.
Assessment Context
In India, there are approximately 640.000 villages grouped together within what are called districts, the unit used by most government programs to implement policies. At the time of the study, there were 593 districts in the country, but only 562 were included, as the others were classified as urban districts. Districts were used as the unit of measurement in the study because they were available in all the databases necessary for the research.
Between 2001 and 2010, the PMGSY provided paved roads to over 110 million people, approximately 14,5% of the entire rural population. The road improvement and construction scheme was funded by the Indian federal government; however, the implementation of the program was the responsibility of the states.
The states responsible for implementing the PMGSY were asked to develop a basic road network, defining the minimum number of roads needed to provide access to all villages. Therefore, only those roads included in the core network could be built under the program. Within this network, priority should be given to villages with a population greater than 1.000 inhabitants, followed by those with populations between 500 and 1.000 inhabitants, and, if eligible, those villages with 250 to 500 people.
Policy Details
Analyzing a road construction program in over 500 villages over a 10-year period, the author aims to define the causal impact of paved road connectivity, with unpaved roads serving as the control group. This identification is based on each village's annual exposure to new roads, which, being a function of village size distribution, is exogenous to economic outcomes. Therefore, the impact on families will be analyzed from five perspectives:
(i) prices of goods imported from outside the village;
(ii) variety of consumer baskets;
(iii) adoption of technology in agriculture;
(iv) investment in human capital in children and adolescents;
(v) employment options for teenagers and adults.
By combining several databases, a database was built containing data on road construction at the village level, population, road approval date, granular household-level data on consumption of over 350 items, individual-level information on education and labor market participation, as well as data on agricultural input use.[1]This allowed for a comprehensive analysis of the impacts that the construction brought about.
The control variables were the village population categories (250, 500, and 1.000), the proportion of castes, the distance from the nearest city, religion, land type (agricultural or non-agricultural), land size, family size, and variables indicating public goods. Villages with 1.000 or more inhabitants had a 41 percentage point higher probability of receiving a road, while villages with a population between 500 and 1.000 inhabitants had approximately a 25 percentage point higher probability.
To evaluate the effect of rural road construction, the research used the Differences-in-Differences method, as this method allows for analysis between the control group and the treatment group, which received the paved road implementation policy.
Results
The results demonstrated that the road had a significant impact on reducing rural prices of manufactured goods imported from urban areas, appearing in three products: salt, leaf tea, and matchboxes. The effect of the treatment on the price of salt was 122% greater than the effect of the treatment on the price of tea. According to statistics released by the Indian government, the monthly expenditure rate... per capita In real terms, rural household income grew by 7,5% between 2000 and 2010 (Ministry of Statistics and Programme Implementation, 2011), suggesting that the drop in prices was equivalent to 4 years of economic growth.
Regarding the variety in the consumption basket, the results suggested that, among food items, a family that gains access to a paved road reduces the types of cereals and lentils by 0,4. Furthermore, it increased the consumption of dairy products by 0,1, fruits by 0,4, and processed foods by 0,37. In other words, a reduction was observed in the variety of basic non-perishable foods and an increase in the variety of perishable and processed foods consumed by a family.
The construction of the roads also impacted education, since after the implementation of the program there was a 5 percentage point increase in the number of school enrollments of children aged 5 to 14. According to the author, this was probably due to the improvement in children's physical access to school.
However, teenagers dropped out of school and started working as job market opportunities expanded with road construction. This is evident in the results for 14-20 year olds, where the program's implementation led to an 11 percentage point drop in school enrollment. But this result may be a consequence of the expanding job market, since when a road was being built, women in this age group were 9 percentage points more likely to start working, an increase of 25%.
These findings indicate that there has been market integration, enabling more intense trade between urban and rural areas.
Regarding technology adoption, the results provide evidence that road construction led to a reduction in transportation costs and, consequently, better access to goods and labor markets. The use of fertilizers and hybrid seeds increased by 3% and 2%, respectively.
Lessons in Public Policy
The impact on mobility is potentially far-reaching and could facilitate more than just trade. It could alter behavior in education, the labor market, fertilizer use, service provision, and even shift the economic landscape.
These impacts occur because improvements in urban mobility through road construction lead to reduced transportation costs and changes in prices.
Reference
AGGARWAL, Shilpa. Do rural roads create pathways out of poverty? Evidence from India. Journal of Development Economics, vol. 133, p. 375-395, 2018.
[1] Pradhan Mantri Gram Sadak Yojana.
[2] Databases: Online Management and Monitoring System (OMMS), Population Census (2001 and 2011), National Sample Survey (NSS) Data (2001 and 2010), and Agricultural Inputs Survey (2001-2002 and 2006-2007).
