Transport Infrastructure and Welfare: An Application to Nigeria

67 Pages Posted: 20 Apr 2016 Last revised: 21 May 2020

See all articles by Rubaba Ali

Rubaba Ali

World Bank; University of Maryland

Alvaro Federico Barra

World Bank

Claudia N. Berg

International Monetary Fund (IMF)

Richard Damania

World Bank; University of Adelaide - School of Economics

John D. Nash

World Bank

Jason Russ

World Bank; George Washington University

Rubaba Ali

affiliation not provided to SSRN

Jason Daniel Russ

World Bank

Date Written: May 18, 2015

Abstract

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 Africa's Development projects.

Keywords: Transport Services, Livestock and Animal Husbandry, Poverty Lines, Poverty Impact Evaluation, Small Area Estimation Poverty Mapping, Poverty Monitoring & Analysis, Poverty Assessment, Poverty Diagnostics, Inequality

Suggested Citation

Ali, Rubaba and Barra, Alvaro Federico and Berg, Claudia N. and Damania, Richard and Nash, John D. and Russ, Jason and Ali, Rubaba and Russ, Jason Daniel, Transport Infrastructure and Welfare: An Application to Nigeria (May 18, 2015). World Bank Policy Research Working Paper No. 7271, Available at SSRN: https://ssrn.com/abstract=2607771

Rubaba Ali (Contact Author)

World Bank ( email )

1818 H Street, NW
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University of Maryland ( email )

College Park
College Park, MD 20742
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Alvaro Federico Barra

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Claudia N. Berg

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
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Richard Damania

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
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University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 4933 (Phone)
+61 8 8223 1460 (Fax)

John D. Nash

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jason Russ

World Bank

1818 H Street, NW
Washington, DC 20433
United States

George Washington University

2121 I Street NW
Washington, DC 20052
United States

Rubaba Ali

affiliation not provided to SSRN

Jason Daniel Russ

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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