Better Roads, Better Off? Evidence on Upgrading Roads in Tanzania

Abstract

ABSTRACT Spatial isolation is considered to be one of the main determinants of poverty. Therefore, many transport investments are undertaken with the stated objective of poverty reduction. This paper evaluates the effect of a Tanzanian program that rehabilitated 2,500 km of major roads on rural livelihoods. The analysis uses a large set of variables describing household behavior in order to provide a complete picture of the adjustments. The identification consists of combining a household fixed effects strategy with propensity score matching. Some damaging effects of the program are found on the rural population in the two years following the intervention: the price of rice decreases; households reallocate labor away from agriculture and provide more wage work, but the increase in wage income does not compensate for the loss in agricultural income. Nor do households seem to be benefiting from the fall in the price of rice at consumption level. These results are consistent with rural households facing increased competition due to reduced transportation costs.