Economic Benefits and Returns to Rural Feeder Roads: Evidence from a Quasi-Experimental Setting in Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Stifel. David

Using an equivalent variation approach, we estimate households’ willingness-to-pay for rural feeder roads in Ethiopia. The problem of endogenous road placement is addressed by a purposeful data collection process as the survey site was chosen in such a way that the primary difference between households in the otherwise homogeneous region is that transport costs to the same market differ substantially within the region (most remote households have to walk eight hours to reach the market). Using this quasi-experimental setting, we compare the economic behavior of households by remoteness, allowing us to estimate the benefits of having access to feeder roads for rural households. We find that the benefits of reducing transportation costs by 50 US Dollars per metric ton for the most remote households would result in benefits worth roughly 35 percent of household consumption and that a hypothetical gravel road built halfway through the survey site that lasts 10 years will have an internal rate of return that ranges from 12 to 34 percent, using conservative assumptions. The lower range of estimates allows for transport services that are restricted to intermediate means of transport such as donkey-drawn carts. These results suggest that investments in rural feeder roads are cost-effective ways to help reduce widespread poverty even in unfavorable settings where (a) small-scale farmers have low levels of marketed agricultural surplus, (b) nonfarm earnings opportunities are negligible, and (c) the provision of motorized transport services is not guaranteed.

Corporate Author:Demirew Getachew; Getenet Alemu; Worku Gebeyehu (Editors) and Ethiopian Economic Association
Publisher:Ethiopian Economic Association (EEA)
Primary Descriptors:transport benefits, rural infrastructure

Secondary Descriptor:Transport costs, welfare measurement

Geographic Descriptors:Ethiopia, rural
Cataloge Date:10/11/2013
Broad Subject heading:Agricultural household models
Call Number:330.963 PRO 2013
Serial Key Title:Proceeding of the Tenth International Conference on the Ethiopian EconomyEconomy
Publication catagory: International Conference
Content type: EEA Publication
Publication date:2013-06-03 00:00:00
Conference Place: EEA Multi-Purpose Building Conference Hall, Addis Ababa
Place of publication: Addis Ababa, Ethiopia
Type of material:Book
Current frequency:Annually
Author: Stifel, David ; Minten, Bart and Bethlehem Koro
Conference date:July 19 – 21, 2012