Infrastructure in Conflict-Prone and Fragile Environments

In conflict-prone situations, access to
markets is necessary to restore economic growth and generate
the preconditions for peace and reconstruction. Hence, the
rehabilitation of damaged transport infrastructure has
emerged as an overarching investment priority among donors
and governments. This paper brings together two distinct
strands of literature on the effects of conflict on welfare
and on the economic impact of transport infrastructure. The
theoretical model explores how transport infrastructure
affects conflict incidence and welfare when selection into
rebel groups is endogenous. The implications of the model
are tested with data from the Democratic Republic of Congo.
The analysis addresses the problems of the endogeneity of
transport costs and conflict using a novel set of
instrumental variables. For transport costs, a new
instrument is developed, the natural-historical path, which
measures the most efficient travel route to a market, taking
into account topography, land cover, and historical caravan
routes. Recognizing the imprecision in measuring the
geographic impacts of conflict, the analysis develops a
spatial kernel density function to proxy for the incidence
of conflict. To account for its endogeneity, it is
instrumented with ethnic fractionalization and distance to
the eastern border. A variety of indicators of well-being
are used: a wealth index, a poverty index, and local gross
domestic product. The results suggest that, in most
situations, reducing transport costs has the expected
beneficial impacts on all the measures of welfare. However,
when there is intense conflict, improvements in
infrastructure may not have the anticipated benefits. The
results suggest the need for more nuanced strategies that
take into account varying circumstances and consider actions
that jointly target governance with construction activities.