No.138 Does a Rural Road Improvement Project Contribute to Inclusive Growth? – A Case Study from Bangladesh

The concept of “Inclusive growth,” which has increasingly been used in the international arena, is concerned with both the pace and pattern of growth (i.e., the income growth of both poor and non-poor, non-income poverty and inequality). Developing countries and donors have often considered rural roads to have a positive impact on the growth of the rural economy and poverty reduction, through the promotion of better connectivity. This paper analyzes the impact of a rural road improvement project on inclusive growth in Bangladesh using a difference-in-difference method based on panel data from a large household survey. The results show that the project did contribute to the growth of the average income in the project area, and therefore to the inclusive growth at the national level. However this was mainly because of the income growth of households other than the poorest. In particular, the poor households with inferior initial resource endowments in landholding and household occupation did not benefit from the project. Thus, rural road projects are not necessarily inclusive at household level, though project specific factors should carefully be considered. A policy implication is that a rural road project in a poor rural area does not always benefit the poorest; hence complimentary interventions for these poorest households are needed.

Keywords: inclusive growth, impact analysis, rural infrastructure, Bangladesh