Infrastructure and Trade in Asia

Infrastructure and Trade in Asia

ADBI series on Asian Economic Integration and Cooperation

Edited by Douglas H. Brooks and Jayant Menon

Analysis of infrastructure’s role in facilitating international trade and consequently regional economic integration is still rudimentary. This original book fills that knowledge gap by exploring relevant concepts, measurement issues, aspects of the implementation of trade-related infrastructure facilities and their impacts on poverty, trade, investment and macroeconomic balances.

Chapter 6: Roads and Poverty: A General Equilibrium Analysis for Lao PDR

Jayant Menon and Peter Warr

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics

Extract

1 Jayant Menon and Peter Warr I. INTRODUCTION It is obvious that low-quality roads impose costs on people living far from market centres. In the Lao People’s Democratic Republic (PDR) this is a particular problem. The country is mountainous and for historical reasons roads in many rural areas remain badly maintained or even non-existent. Because the poorest people often reside far from urban centres, these people are the most disadvantaged by the high transport costs resulting from bad roads. Over the past two decades Lao PDR has made considerable progress in reforming the legal and administrative obstacles to market-based development that were a legacy of earlier policies. But for people facing very high transport costs arising from inadequate roads, these reforms may be of limited value. For them, markets cannot be accessed except at a high cost. Bad roads are clearly an obstacle to attaining the potential benefits from market-based economic reform. Considerable effort is being invested in the improvement of rural roads in Lao PDR. The expected benefits include reductions in the incidence of poverty within rural areas. But the quantitative relationship between road improvement and poverty reduction is not well understood. The present study focuses on this relationship. The analysis uses a general equilibrium modelling approach in which road improvement is modelled as a reduction in transport costs. The modelling framework used in the study is specially designed to analyse the manner in which transport cost reductions impact on poor people. In Section II we...

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