Connections Transport & ICT Creating Pro-Poor Transport 102766 Connecting the Dots: Transport, Growth, and Poverty Reduction Muneeza Mehmood Alam1 Transport plays a crucial role in connecting people to goods 11.5km and services and fostering sustainable development. The literature links improved transport infrastructure to economic growth and poverty reduction through five key mechanisms (1) reducing transport and production costs, (2) creating jobs, The minimum distance (3) expanding productive capacity, (4) improving access to to a tarmac road for markets and basic services like health and education, and (5) 27% of chronically poor reducing prices of final goods and services. These benefits agricultural households depend on supportive conditions in other sectors, such as in Kenya access to credit, functioning land markets, low trade barriers, and so on. Therefore, any assessment of potential gains from transport infrastructure and services should also account for the interaction with complementary markets. However, the analysis of such interactions—assessing how and when transport infrastructure can help reduce poverty and income inequality—is largely missing from the literature, leaving significant knowledge gaps across the spectrum of transportation settings. This note highlights existing findings and some limitations in the literature on three basic types of transport infrastructure: large projects such as regional or national highways and railroads; rural transport; and transport in urban areas Regional and National Transit average annual rates of growth for exports (by 6%) and employment (by 5%). In China, connecting cit- Corridors (Highways and Railroads) ies with railroads has moderately increased county- Improving connectivity between and within coun- level GDP per capita, and in India, colonial railways tries can bridge stark differences in economic boosted interregional trade and raised real income development by strengthening interregional trade. levels. For example, five coastal countries in Africa—An- Improvements in transport infrastructure can also gola, Kenya, Nigeria, South Africa, and Sudan—ac- enhance firm efficiency and affect firm location. count for more than 70% of Africa’s GDP. But in Upgrading highway infrastructure has allowed sub-Saharan Africa overall, estimates suggest Indian firms to hold inventory for shorter durations, that tightening the connectivity between cities by increased the survival rate of existing firms, and in- upgrading the primary road network can catalyze duced new firms to open near upgraded highways. trade worth hundreds of billions of dollars. In Indonesia, expressways have been associated In Peru, intercity highway upgrades increased the with the dispersion of manufacturing activities. 1 This note draws on the works listed under further reading. The author is grateful for helpful comments from Karla Carvajal, Carlos Castelan, Matias Dappe, Steven Farji, Somik Lall, Harris Selod, Nancy Vandyke, and Tara Vishwanath and other reviewers in the World Bank’s Develop- ment Economics Group, Poverty Global Practice, and the Transport and ICT Global Practice. OCTOBER 2015 NOTE 24 Rural Settings consuming and limits their job search radius. Thus, the geographic dispersal of the labor market can Transport can play a crucial role in enhancing food dampen the gains from industrial agglomeration. security and agricultural productivity. For example, A lack of security in the public transit system may Africa could become self-sufficient in food and also limit the labor market participation and job create a regional food market worth $1 trillion by search radius of the poor, particularly for women, 2030. But farmers will need better access to roads who are especially dependent on public transport. to trade their products. Africa’s current food insuf- Even a simple intervention can make a difference: ficiency is not surprising given the deficiencies in improving nighttime lighting reduced the incidence its road infrastructure—the average road density in of crime around bus rapid transit stops in Colombia. low-income countries in sub-Saharan Africa is less than one-third that in other low-income countries. Improving rural road connectivity has been shown Documenting the Poverty Dimension to increase agricultural productivity by reducing the travel time to agricultural markets, inducing of Transport: A Long Way to Go farmers to adopt modern farming techniques and Documenting the link between transport interven- favor cash crops, and raising market participation. tions and the various dimensions of poverty and Improving road quality has also been shown to income inequality will require much more system- induce migration and shift workers from agriculture atic attention from research. To date there is only to manufacturing. limited evidence on the direct impact of transport infrastructure on poverty and income inequality. Research shows that reducing rural isolation—by (1) For national transport infrastructure, improving lowering transportation costs and travel times or interregional connectivity can enhance welfare by improving road access and proximity to markets— insuring farmers against bad weather. (2) Regard- may have multiple benefits. It is associated with a ing rural settings, improvements in transport in reduced likelihood of a household’s facing multi- Vietnam and Madagascar were most beneficial for dimensional poverty, with increased school enroll- the least developed and remotest areas. In contrast, ment rates for boys and girls and disadvantaged in rural Nepal, easier access to roads appears to groups, and with greater use of distant hospitals. have benefited poor households but did not reduce income inequality. In rural Bangladesh, middle-in- Urban Settings come households benefited the most from invest- ments in roads. (3) The impact of urban transport The placement of transport infrastructure within projects on the welfare of the poor is largely un- a city can alter the production mix of the urban documented in the research. economy, affect employment opportunities for the poor, and alter crime rates. For example, evidence suggests that the development of city roads in Colombia has shifted economic activity toward For more information on this topic: the production of lighter tradable goods. Similarly, transport infrastructure has altered the economic C. Berg, U. Deichmann, Y. Liu, and H. Selod. 2015. “Transport Policies landscape of Chinese cities—radial highways have and Development.” http://documents.worldbank.org/curated/ decentralized the services sector, radial railroads en/2015/07/24779047/transport-policies-development. have decentralized the industrial sector, and ring P. Starkey and J. Hine (2014). “Poverty and Sustainable Transport: How Transport Affects Poor People, with Policy Implications For roads have decentralized both sectors. Poverty Reduction—A Literature Review.” http://www.slocat.net/ docs/1561 The urban poor rely heavily on public transpor- R. Ali, A. Barra, C. Berg, R. Damania, J. Nash, and J. Russ. 2015. tation for commuting. Without fast, secure, and Highways to Success or Byways to Waste: Estimating the Economic affordable mass transportation, the urban poor Benefits of Roads in Africa. https://openknowledge.worldbank.org/ are typically forced to walk to work, which is time handle/10986/22551. Connections is a weekly series of knowledge notes from the World Bank Group’s Transport & Information and Communication Technology (ICT) Global Practice. Covering projects, experiences, and front-line developments, the series is produced by Nancy Vandycke and Shokraneh Minovi. The notes are available at http://www.worldbank.org/transport/connections. 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