Rubaba Ali

Who benefits most from rural electrification ? evidence in India

This paper applies an econometric analysis to estimate the average and distribution benefits of rural electrification using rich household survey data from India. The results support that rural electrification helps to reduce time allocated to fuelwood collection by household members and increases time allocated to studying by boys and girls. Rural electrification also increases the labor supply of men and women, schooling of boys and girls, and household per capita income and expenditure. Electrification also helps reduce poverty. But the larger share of benefits accrues to wealthier rural households, with poorer ones having more limited use of electricity. The analysis also shows that restricted supply of electricity, due to frequent power outages, negatively affects both household electricity connection and its consumption, thereby reducing the expected benefits of rural electrification.

Does access to finance matter in microenterprise growth ? evidence from Bangladesh

In less-developed economies such as Bangladesh, the farm sector is the major source of employment and income, while the rural nonfarm sector provides as an additional source of income. But the rural nonfarm sector increasingly plays an important role in fostering the development of the rural economy. A significant share of this sector is made up of microenterprise activities, which requires investment and access to adequate funds. This paper investigates the role access to finance plays in promoting the efficiency and growth of microenterprise activities. The findings suggest that households engaged in microenterprise activities, in addition to farm and other nonfarm activities, are much better off (in terms of income, expenditure and poverty) than those not engaged in such activities. Fewer than 10 percent of the enterprises have access to institutional finance (formal banks or microcredit), although the rate of return on microenterprise investments is more than sufficient (36 percent per year) to repay institutional loans. The research suggests that credit constraints may reduce the enterprises profit margin by as much as 13.6 percent per year. As the returns to microenterprise investment are found to be high, microfinance institutions can play a larger role in supporting microenterprise growth in Bangladesh.

Infrastructure in conflict-prone and fragile environments : evidence from the Democratic Republic of Congo

In conflict-prone situations, access to markets is necessary to restore economic growth and generate the preconditions for peace and reconstruction. Hence, the rehabilitation of damaged transport infrastructure has emerged as an overarching investment priority among donors and governments. This paper brings together two distinct strands of literature on the effects of conflict on welfare and on the economic impact of transport infrastructure. The theoretical model explores how transport infrastructure affects conflict incidence and welfare when selection into rebel groups is endogenous. The implications of the model are tested with data from the Democratic Republic of Congo. The analysis addresses the problems of the endogeneity of transport costs and conflict using a novel set of instrumental variables. For transport costs, a new instrument is developed, thenatural-historical path,which measures the most efficient travel route to a market, taking into account topography, land cover, and historical caravan routes. Recognizing the imprecision in measuring the geographic impacts of conflict, the analysis develops a spatial kernel density function to proxy for the incidence of conflict. To account for its endogeneity, it is instrumented with ethnic fractionalization and distance to the eastern border. A variety of indicators of well-being are used: a wealth index, a poverty index, and local gross domestic product. The results suggest that, in most situations, reducing transport costs has the expected beneficial impacts on all the measures of welfare. However, when there is intense conflict, improvements in infrastructure may not have the anticipated benefits. The results suggest the need for more nuanced strategies that take into account varying circumstances and consider actions that jointly target governance with construction activities.

Highways to success or byways to waste : estimating the economic benefits of roads in Africa

This study develops and tests new approaches to the planning of infrastructure to maximize benefits and minimize negative externalities, particularly in rural areas. It explores several questions related to the impacts of infrastructure on welfare and poverty that are especially relevant for Sub-Saharan Africa. Reducing poverty in Sub-Saharan Africa - currently the poorest region in the world despite its widely acknowledged enormous potential for growth - is the world’s supreme development challenge. A key element is to enhance living conditions in rural areas, and this report argues that with caveats and qualifications - improved transport linkages can make a significant contribution, and demonstrates a methodology for determining the magnitude and location of those benefits. To set the stage the report explains why there is good reason to believe that the prospects are bright for setting the agricultural sector in Africa on a high-growth trajectory, given proper conditions. This report seeks to demonstrate that local conditions matter considerably, and the presence or absence of conflict, environmental externalities, and local production potential are the focus of this investigation. Data and econometric issues pose formidable challenges to this effort. The introduction concludes with a short description of each of the subsequent chapters. In brief, chapters two and three examine the positive benefits of road investment on various measures of welfare, and chapters four and five look at the negative aspects.

Transport Infrastructure and Welfare: An Application to Nigeria

Transport infrastructure is deemed to be central to development and consumes a large fraction of the development assistance envelope. Yet there is debate about the economic impact of road projects. This paper proposes an approach to assess the differential development impacts of alternative road construction and prioritize various proposals, using Nigeria as a case study. Recognizing that there is no perfect measure of economic well-being, a variety of outcome metrics are used, including crop revenue, livestock revenue, non-agricultural income, the probability of being multi-dimensionally poor, and local gross domestic product for Nigeria. Although the measure of transport is the most accurate possible, it is still endogenous because of the nonrandom placement of road infrastructure. This endogeneity is addressed using a seemingly novel instrumental variable termed the natural path: the time it would take to walk along the most logical route connecting two points without taking into account other, bias-causing economic benefits. Further, the analysis considers the potential endogeneity from nonrandom placement of households and markets through carefully chosen control variables. It finds that reducing transportation costs in Nigeria will increase crop revenue, non-agricultural income, the wealth index, and local gross domestic product. Livestock sales increase as well, although this finding is less robust. The probability of being multi-dimensionally poor will decrease. The results also cast light on income diversification and structural changes that may arise. These findings are robust to relaxing the exclusion restriction. The paper also demonstrates how to prioritize alternative road programs by comparing the expected development impacts of alternative New Partnership for Africas Development projects.

Fixed-Effects Panel Data Analysis of Gasoline Prices, Fare, Service Supply, and Service Frequency on Transit Ridership in 10 U.S. Urbanized Areas

Gasoline price increases since 1999 have generated substantial discussion about their effect on travel behavior. With panel data for 10 selected U.S. urbanized areas between 2002 and 2011, this study analyzed the effects of gasoline prices and three factors that were internal to transit agencies—fare, service supply, and service frequency—on ridership of bus, light rail, heavy rail, and commuter rail, as well as their aggregate ridership. Improving on past studies on the subject, this study accounted for the simultaneous relationship between service supply and ridership and controlled for factors that were external to transit agencies control but might have influenced ridership. With fixed-effects models that examined temporal changes within each urbanized area, the analysis found that the possibility of simultaneity was low. The results of estimated coefficients showed that the short-term increase in ridership due to gasoline price increases was relatively small for bus and aggregate transit and marginal for rails, certainly smaller than the effects of the three internal factors. The total influence of the three internal factors was found to be more substantial than that of external factors; this finding indicated the potential to increase ridership by transit agencies efforts when resources were available. In addition, it is recommended that transit agencies prepare for a ridership increase more for bus than for rail because of gasoline prices, considering that even a small increase could require a substantial service increase to accommodate travelers needs during peak periods.