Resource information
Infrastructure investments are typically
long-term. As a result, observed benefits to households and
communities may vary considerably over time as short-term
outcomes generate or are subsumed by longer-term impacts.
This paper uses a new round of household survey as part of a
local government engineering department's rural road
improvement project financed by the World Bank in Bangladesh
to compare the short-term and long-term effects of rural
roads over eight years. A dynamic panel model, estimated by
generalized method of moments, is applied to estimate the
varying returns to public road investment accounting for
time-varying unobserved characteristics. The results show
that the substantial effects of roads on such outcomes as
per capita expenditure, schooling, and prices as observed in
the short run attenuate over time. But the declining returns
are not common for all outcomes of interest or all
households. Employment in the rural non-farm sector, for
example, has risen more rapidly over time, indicating
increasing returns to investment. The very poor have failed
to sustain the short-term benefits of roads, and yet the
gains accrued to the middle-income groups are strengthened
over time because of changing sectors of employment, away
from agriculture toward non-farm activity. The results also
show that initial state dependence -- or initial community
and household characteristics as well as road quality --
matters in estimating the trajectory of road impacts.
