Who Benefits from Rural Road Projects in the Long Run?

Infrastructure investments like rural roads are generally for the long haul. But it's difficult for researchers to measure their long-term impact, as it can be confounded by changes in outside factors that cannot be observed but affect road development and other outcomes, such as shifts in local political influence and household norms. In a new working paper, Shahidur Khandker and Gayatri Koolwal address this issue in evaluating and comparing the short-term and long-term effects of a road-paving project in rural Bangladesh over eight years. A dynamic panel model, based on household survey data collected under the project, accounts for time-varying unobserved characteristics. It shows the project improved per capita expenditure, schooling, and transport prices in the short term, but the benefits wore off over time. The benefits of rural roads also vary across sectors and the distribution of households. Employment in the rural non-farm sector, for example, rose faster over time, indicating increasing returns to road investment. Gains for middle-income groups strengthened as their employment shifted toward the non-farm sector. But the very poor failed to sustain the short-term benefits of public roads. The results also show that the evolution of benefits depends on initial community and household characteristics, as well as road quality.