Transport Infrastructure and Poverty Reduction: Macro-Level Impacts

Transport infrastructure investment has long been assumed to contribute indirectly to poverty reduction, channeled through economic growth. Recent empirical studies provide considerable evidence to substantiate the claim that transport infrastructure’s impact at the macro level is critical to ensuring sustained growth in output, employment, and income that is a prerequisite for achieving long-term poverty reduction. Kwon’s (2005a) study on the poverty impact of roads in Indonesia finds that road investments improved the performance of provincial economic growth in poverty reduction, such that every one percent growth in provincial GDP led to a decline in poverty incidence by 0.33 percent in good-road provinces and 0.09 percent in bad-road provinces. This implies that the accumulation of road capital has a nonlinear contribution to poverty alleviation. As road capital is accumulated, the link between economic growth and poverty reduction becomes stronger. Likewise, a study on roads and poverty in the People’s Republic of China (PRC) reveals that road development contributed significantly to growth and poverty reduction in the PRC (Kwon, 2005b).

Apart from its indirect contributions to poverty reduction, there is also increasing evidence to show that transport infrastructure can have a direct contribution to poverty reduction, independent of the growth channel. For instance, the same study by Kwon (2005a) reveals that road capital had its own explanatory power for poverty incidence, which was not channeled through economic growth. Provincial roads directly improved the wages and employment of the poor in Indonesia, such that a one percent increase in road investment led to a 0.3 percent drop in poverty incidence over five years. Meanwhile, Warr’s (2005) study on road and rural poverty in Lao PDR shows that all-weather roads had a positive and highly significant impact on poverty: all-weather road access lowered poverty incidence by around six percent, and about 13 percent of the decline in rural poverty incidence between 1997–98 and 2002–03 can be attributed to improved road access alone.

Comment(s)

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1. Anura Widana
   (posted 28 April 2010 / 07:19:56 PM)
   
   Excellent study, hats off to authors!
   Wish to add three more reasons why poor have not benefited from investments on infrastructure.
   a) In the planning process, the poor people were not identified and planning itself was undertaken poor exclusive
   b) The method/s adopted to rehabilitate/ build infrastructure have not been pro-poor. The implementation team decided to get construction work done through private contractors or politicized institutions both of which did not pay attention to poor in the area. Their main interest was to maximize profits for themselves from investments. Hence, poor lost the opportunity to work in construction and thereby could not benefit by way of wages.
   c) The design teams did not include poverty/social but technical specialists only. This made it difficult for implementers to identify poor people, to plan strategies to get them involved and to brain-storm on other projects/activities to be funded so that poor people benefit more from investments.
2. Mohammad Ziaul Ahsan
   (posted 23 April 2006 / 09:49:14 PM)
   
   Transport not only makes econmic development but also saves climate. This book has given us such path to make sustainable development for poverty eradication. Thanking you for your great participation.