Infrastructure and poverty

The impact of infrastructure on poverty is well researched. Bangladesh has a plethora of researches on this issue. We could possibly mention about various studies that have eloquently exposed the differential impacts of infrastructure on poverty level in India.  According to some authors, additional expenditure on roads is found to have the largest impact on poverty reduction as well as a significant effect on productivity growth in rural India. The access leads to larger benefits to the rural poor and emerges as dominant "win-win" strategy. Those involved in research relating to India, suggest that if any choice has to be made in allocating scarce funds among alternative investment purposes, the government of India should pick up roads for investment. More specifically, they focused on agricultural research and extension and roads as the panacea to poverty reduction.
Our observations in this write-up also stand close to the Indian experience. For example, all sample households in rural areas experienced a decline in extreme poverty over time, but the reduction was higher in developed villages compared to others. By developed villages we would mean villages connected with better roads and electricity and embracing higher percentage of cultivated land in HYVs (high-yielding varieties). For example, during the past decades, extreme poverty declined by 2.0 percentage point per annum in developed villages as opposed to roughly 1.0 percentage point in other villages. In fact, poverty reduction in developed villages was higher than the estimated national average. The same trend holds true in the case of other measures of poverty.
First, during the same time period, inequality in income - as reflected by the higher gini ratio of household income - has increased in all sample villages. Noticeably, however, the distribution of income over time appears to be strikingly skewed in developed villages. May be, the opportunities created by better roads and electricity have largely been reaped by the top income deciles in developed villages. If we look at the sources of inequality, we observe that inequality is higher where trade and business are major sources of income. For example, in developed villages, trade and business contributed 40 per cent of the inequality (relative contribution to pseudo gini) in recent years compared to 13 per cent in late 70s. In semi-developed villages also, trade and business continued to impart a pervasive influence in generating inequality. Since, expansion of trade and business is mainly a function of financial and human capital, it is not unlikely that upper income groups in rural areas tend to overtake others to contribute to greater inequality.
On the other hand, cultivation as a source of inequality declined in all villages possibly due to the fact that small and marginal farmer are engaged in it and their share is growing over time. Again, the inequality in income from non-rice crops increased during the same period of time for all villages.  But income from wage labour has been more equaliser than other sources of income. And finally, income from remittances continues to remain as the most dominant source of inequality (pseudo gini ratio 0.60-0.70) in rural areas. However, there seems to be a marginal decline in the index in developed villages compared to under-developed ones.
A recent study collected information about the perceptions of the rural people living in sample villages about their own assessment of economic conditions. It appears that, 54 per cent of respondents from developed villages perceived of an improvement in economic conditions over the years and 23 per cent reported deterioration. That mean, roughly one-thirds of the respondents recorded a net improvement in economic conditions over time.
That infrastructural development is a gateway to economic growth and poverty reduction should come as no surprise. Public investment in infrastructure crowds-in private investment through investment in trade and business, transport services and enabled mobility of the factors of production as well as output. It also helps inflow of remittances via generation of information, establishment of money banks (e-bank), overall connectivity, etc. Since the poor segment in the village now-a-days depends on remittances for their livelihoods, expansion and deepening of infrastructural facilities in and around their villages goes to put them on an even keel.
Access to electricity has many advantages. People of a village in the Philippines reckon that access to electricity has positively impacted on fertility level by reducing the time of the couple in bed (a la A Rice Village Saga by Yujiro Hayami and Kikuchi). Children get time to study; women can pursue economic activities at night and manufacturing and agricultural activities (say helping tube wells run by less expensive electricity) could also be boosted up in the areas concerned. But the lack of regular maintenance of the facilities could turn out to be counter-productive in the medium to long run, if not in the short-run. For example, an embracement might be faced with problems with sluice gates to deter the flow of water for irrigation, holes on roads could damage transport and push up transaction costs, electricity failure following mechanical disturbances would reduce industrial output. Thus, expansion of the access to infrastructural facilities by households, coupled with proper maintenance, deserves special attention.
Abdul Bayes is a Professor                   of Economics at                    Jahangirnagar University.  address:[email protected]