ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE
Roads, Agriculture and Welfare: Evidence from a Quasi-Experimental
Setting in Rural Ethiopia
David Stifel – Lafayette College & IFPRIBart Minten – IFPRIBethlehem Koru – EDRI & IFPRI
EEA Conference 2012July 20, 2012Addis Ababa
1
What are the benefits of rural feeder roads?
The Question:
1. The measure of benefits• A standard road project appraisal relies on majoring
various Impacts (accessibility, quality, mobility,)
• Savings in transport
• Income / Consumption / Poverty impacts
2. Reverse causality• Non-random road placement
Measuring Benefits – Two Issues
• Donkey costs (Birr/kg)o Cost of renting donkey
o Weight donkey can carry
• Economic transport costso Include the opportunity cost
of time
Transport Costs
Average Travel Times and Transport Costs to the Market Town
Travel Time Transport Cost (hours) (Birr/Quintal)Transport Cost Quintile
Least Remote 1.5 18.2Quintile 2 3.6 40.2Quintile 3 5.2 52.5Quintile 4 6.0 60.4Most Remote 6.5 73.4
Total 4.5 48.4
Percent of land holding area
Median plot size
(ha)
Median land
holdings (ha)
Tan color Difficult to plow
Steep slope
Travel cost quintileLeast remote 0.3 2 9.5 17.6 6.3Quintile 2 0.3 1.8 7.4 27.8 16.4Quintile 3 0.3 1.4 8.4 25.8 12.8Quintile 4 0.3 1.1 3.1 33.1 15.3Most remote 0.3 1.3 3.5 37.9 15
Total 0.3 1.5 6.4 28.1 13Source: Authors’ calculations from Ethiopia Rural Transport Survey 2011
Is the primary difference between communities due to transport costs?
Crop Share (in total land area)
Modern Input UsePercent of households using…
Chemical Fertilizer Improved Seeds
Any Dap Urea (maize only)
Transport Cost Quintile
Least Remote 94.2 94.2 83.0 75.6
Quintile 2 86.2 86.2 61.4 31.2
Quintile 3 79.9 78.5 46.5 15.0
Quintile 4 73.2 73.5 49.3 12.4
Most Remote 71.1 71.7 37.5 9.4
Total 81.2 81.1 56.3 33.3
Adjusted Cereal Yields
05
10
15
20
Qui
ntal
s / h
a
0 20 40 60 80 100Birr/Quintal
Sorghum MilletMaize Teff
• Households’ willingness-to-pay for reduced transport costs
• Compensate a remote household just enough such that indifferent between…o Remote (τ = τ0)
o Situation in market town (τ = 0)
Estimate this compensation Equivalent variation
2. Measuring Benefits
• The average benefits are...
• where...
This is just the area under the demand for transport tonnage curve.
2. Measuring Benefits
Demand for Transport Tonnage
02
50
500
750
100
01
25
0kg
0 20 40 60 80 100Transport Cost (Birr/kg)
Total Freight Imported ConsumptionAgricultural Surplus Input Purchases
Demand for Transport TonnageSimple Model
Controlling for landholdings
Transport Cost Difference
Coeff t-stat Coeff t-stat Diff z-stat
Total Freight
Transport cost per quintal -7.9 -9.52 -6.9 -8.51 -1.0 -0.86
Log of HH landholdings (HA) 190.6 10.46
Agricultural Surplus
Transport cost per quintal -3.5 -6.06 -2.4 -4.22 -1.1 -1.31
Log of HH landholdings (HA) 143.7 11.02
Imported Consumption
Transport cost per quintal -2.1 -4.39 -2.1 -4.06 0.0 0.00
Log of HH landholdings (HA) 16.0 1.41
Input Purchases
Transport cost per quintal -2.6-
20.72 -2.5 -20.79 -0.1 -0.80
Log of HH landholdings (HA) 33.5 12.43
Non-Farm Earnings
Pct. of HH with
NF earnings
Median NFearnings*
(Birr)
Percent difference in HH expenditures between those
w/ and w/o NF earnings
Least Remote 7 1,000 20.0
Quintile 2 12 1,300 26.1
Quintile 3 13 1,200 22.8
Quintile 4 14 1,180 22.2
Most Remote 17 1,102 18.4
Total 12 1,102 22.1
* Among those with non-farm earnings
• Most remote households as accessible as the least remote
• ↓ transport costs by US$ 50 / ton
• Benefit ≈ 3,300 Birr per year (US$ 194)
o This is 60.5% of mean consumption (most remote)
Benefits Estimate
Benefit Estimates
For households in each of the following evenly spaced gridpoints
Benefit as percent ofhousehold consumption
Uncorrected Adjusted*2nd 2.0 2.03rd 5.4 5.34th 6.5 6.55th 6.7 6.76th 7.4 7.27th 17.2 16.98th 23.5 23.09th 53.0 51.8
Most remote 60.5 57.6
Average for all households 9.3 9.1
* Adjusted for landholdings
• Cost ≈ 28 million Birr (US$ 1.60 million)
800,000 Birr / km of gravel road
35 km
• Benefits ≈ 10 million Birr per year (US$ 0.58 million)
1,930 Birr benefit on average
5,180 households in survey area
Three years for accrued benefits to exceed cost
Benefits vs. Costs
• Benefit to most remote HH ≈ 60% of HH consumption
• Costs of construction recovered in 3 years
• Final comments…o Only rural feeder roads
o Potential non-farm earnings
o Transport services are necessary
Concluding Remarks
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