Here is an interesting paper [warr-aares-2007.pdf] about the potential role of road building in poverty alleviation in Laos. The Australian National University’s Peter Warr uses general equilibrium modelling to argue that “road improvement does reduce poverty but that the quantitative impact depends heavily on the types of road that are provided and the areas in which the road is located.” Here is the paper’s conclusion:
Our analysis indicates that reducing transport costs through rural road improvement generates significant reductions in poverty incidence. It does this through improving the income earning opportunities of rural people and through reducing the costs of the goods they consume. A feature of our results is that when no vehicle access areas are provided with dry season access roads (dirt and gravel), the reduction in poverty incidence is about 17 times the reduction that occurs when dry season access only roads are upgraded to all weather access (paved and improved gravel) roads. The ratio of the effect on GDP is about 6. Reducing transport costs for households without road access is highly pro-poor.
These results do not demonstrate that road improvement should be shifted away from upgrading dry season access roads to providing road access to villages currently lacking it. Both forms of road improvement are important and both contribute to overall poverty reduction. Moreover, the costs of road building in the two cases need to be taken into account in determining the most appropriate road building strategy. It is likely that the cost per kilometer of providing road access where there is currently none is bound to be significantly higher than upgrading existing roads. This paper has not looked into these costs but this is an important area that future research could address. However, our results confirm that there is considerable scope for reducing poverty incidence in Laos by reducing rural transport costs through improving the quality of rural roads.
There is considerable potential for discussing the other social and cultural impacts of road building, but Warr’s argument is one that will make a lot of sense to many observers of local development in the region.
7 responses so far ↓
1 Srithanonchai // Apr 20, 2007 at 12:20 am
“Warr’s argument is one that will make a lot of sense to many observers of local development in the region.” Indeed, Warr’s insight is not exactly knew, but maybe one needs to refresh it from time to time.
2 Jon Fernquest // Apr 20, 2007 at 3:31 am
Thanks for this paper. I was always amazed at the speed and ubiquity of Thai fruits such as Durian which are available even late at night at the furthest north point in Thailand, Maesai. In Yangon buy a Durian coming from nearby Moulmein (like Rayong near Bangkok) and the price jumps incredibly.
It would be interesting to see such a general equilibrium model for Burma, but I guess data collection/survey is problematic?
3 Johpa // Apr 21, 2007 at 12:35 pm
I suppose the use of a statistical model might be needed by government agencies to quantify what most capable observers should be able to note: having a road to a village is better for poor villagers than having no road. And building a dry season road should give you a bigger bang for the baat/buck than the expense of an all-season road as even in the rainy season, a dry season road will be passable much of the time.
I have lived extended periods of time in two different isolated villages in northern Thailand. Back in the 1980s both were served by roads that were fairly crude, one a dry season road as defined by Warr and one a road intermediate between no road and a dry season road as lack of adequate bridges severely limited travel even in the dry season. The transportation costs for using these roads was quite high, not simply because of the poor quality, but because of the time it would take to get from point A to point B.
The dry season road had regular song thaaw (pickup truck) service, but at the cost of 10 Baat per trip for all of 10km. This trip would take over an hour on a good day when the passengers did not have to get out and push. Compare that to about the same cost, at that time, for travel by bus from Fang to Chiang Mai, a distance of about 150km. It was very expensive if not prohibitive for the locals to travel to the nearest market either to sell produce or to purchase goods. And only those with traumatic injuries might find be taken to seek medical care at a hospital. Food was grown locally, rice was milled locally or manually in the home each morning, clothes were woven locally, and western observers might conclude that there was a high poverty level.
Today that same village has a paved road. Locals wear inexpensive store-bought clothing and one no longer sees naked children playing about. Access to medical care is far easier with much less costs. Western observers might conclude that there was now less poverty. But at some point it becomes a subjective decision as to where poor people hit the poverty level. For all the improvements that the road brings, and one does not need equilibrium modeling to attest to the improvements, the road also brings exploitation and sorrow ranging from con artists to pimps. Certainly western observers like myself or Warr would be quick to note a reduction in perceived poverty and improvements in healthcare in the village above and argue for roads. Yet after all the changes over the past 25 years, all I see now are friends who are still poor but a lot less happy than 25 years ago. The road took away the laughter and song, something the statistical analysis does not capture.
4 Jon Fernquest // Apr 22, 2007 at 4:42 am
“…all I see now are friends who are still poor but a lot less happy than 25 years ago.”
Yes, respecting, for instance Akhas, their culture, their language and names, making them the owners of the land that they farm or guardians of the forest instead of forestry officials for whom respect for other ethnic groups is not part of the job description, this would also make the hill areas in Thailand a better place, like Bhutan which is so popular nowadays. However, knowing quite well how some Thai elites are addicted to shows for Bangkok, I would say the future does not look that bright. If it wasn’t for the despicable ying, ying, ying Heart of Darkness routines they put one, there might be a chance.
Maybe a large socially responsible corporation will step in with a fair contract farming program. These do exist. I know very satisfied Taptim fish farmers working with CP Group in Ban Pongkong near Chiang Saen.
They’re doing an general equilibrium model similar to the one described in this paper at a university in Chiang Rai, but given the stifling intellectual atmosphere and lack of all critical thought there and the number of foreign economics professors they’ve cheated and abused like disposable napkins, one was promoted to lecturer and for close to a year was never paid the salary and finally (and very good heartedly) left. Of course, you’re never supposed to mention this stuff, just let it go on forever..
In line with local roads being important local food processing according to a friend has yet to really take off, so the possible benfits of moving processing upstream to the local economy might be one thing demonstrated by a model.
“It was very expensive if not prohibitive for the locals to travel to the nearest market either to sell produce or to purchase goods.”
I’ve seen Chinese merchants driving pickup trucks over some pretty muddy and hilly roads and acting as brokers.
5 Thai Radio // Apr 22, 2007 at 7:16 pm
I believe that roads are a strong tool of development.
A stark example is the transamzonian road in Brazil:
thanks to this road Brazil is empowering its economy.
6 Historicus // Apr 24, 2007 at 6:15 am
Warr’s study is not really telling us much that is new. Economic studies going back to the 1960s in Thailand show positive economic impacts for the poor. But, as Thai Radio implies, roads bring multiple impacts – economic, health, environmental, social, etc. The problem is that economists doing benefit-cost analysis tend to neglect multiple impacts. In 1995, one study summarised claimed positive social impacts, based on existing studies:
- that ’support services’ are required during construction, and villagers may supply some of these;
- people will benefit by improved, cheaper and more convenient access to education, health services and commercial goods;
- those providing social services (eg. teachers) are encouraged to move to accessible villages and their services are better utilised (eg. school enrolments increase);
- improved public transportation and access to markets, especially for farm produce, but also for handicrafts (usually produced by women);
- traders have better access and the number of village shops increases;
- changes to consumption patterns, with new goods purchased (eg. clothes, electrical goods);
- expansion of cropping, including cash crops, and especially upland crops, with new farming technologies are introduced;
- reduction of subsistence production on the farm and in handicrafts and an introduction of non-farm economic activities;
- expansion of land area available to farming;
- improved internal security;
- the area is more attractive, with potential in-migration, while out-migration is reduced;
- attraction to outside investment is increased, with rising land prices near new or upgraded roads;
- if roads are sealed, a reduction in dust and noise pollution;
- reduction of rural isolation, meaning improved government links to the villages; and
- poverty reduction.
At the same time, these studies listed potential negative impacts:
- pollution during road construction;
- the increased risk of STDs (including HIV/AIDS) through locally-supplied sexual services to construction workers and truckers;
- loss of land through bridge and road alignments and realignments;
- temporary loss of labour to households while workers are required at construction sites;
- the need for some relocation caused by construction;
- increased wealth and income inequalities, especially for poor women;
- disproportioning of benefits, skewed to traders and through traffic, with relatively fewer benefits to local people (only access roads change this pattern);
- increased road deaths and serious injury and damage to property;
- increased land prices on improved roads resulting in speculation;
- a tendency for local rural population to move to land adjacent to new roads;
- the potential for reduced handicrafts production by women, thus limiting market opportunities; and
- increased logging and improved transportation of timber offers the potential for environmental degradation and for the alienation of traditional farming and swidden land.
7 jeplang // Apr 27, 2007 at 6:55 pm
Modellers, like artists ,tend to fall in love with their models.
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