Analysis on the Effects ofRoad Infrastructure on Poverty
Reduction in China
Presented by
Li Jie 15-138242

China! China!
Second-largest economy inthe world Average 10 percent GDP
growth since 2002
 Still has 128 million
impoverished people, 10%of its total population
 Gini coefficient: more than
0.473 in 2013
2

Poverty Reduction Project in Rural China
 “Linking All Villages” (村村通) project in China

The largest infrastructure reconstruction project inrural area in the world, including road, electricity,water, telephone network, cable television
network, internet, etc.
 Time span：1998- 2020
 Budget: 1 trillion RMB (16 billion USD)
3village roads before reconstruction

village roads after reconstruction

Criticism
 Transportation infrastructure as a channellinking rural people to the outside world
 Provide convenience for farmers to sell theirproducts to the market
 Criticized as lacking enough empiricalevidence on poverty reduction
 Public intellectuals doubt the effect ofinvesting money on road construction

Literature Review
 Ravi Kanbura and Ganesh Rauniyar(2010)

should improve road connections within ruralareas should improve road connections between ruraland urban areas Wang (2010)
believes that investing on infrastructure will
alleviate poverty and enhance economic growth6

Literature Review
 Department for International Development(DFID, 2002)
infrastructure investment had little relevance topoverty reduction
 actual benefits from infrastructure weresignificantly less than anticipated

Theoretical Framework

Asian Development Bank (1999); Ali and Pernia(2003)
The poor need greater access to education, healthservices, water, sanitation, employment, credit, andmarkets

8Theoretical Framework

Asian Development Bank (1999); Ali and Pernia(2003)
The poor need greater access to education, healthservices, water, sanitation, employment, credit, andmarkets

My interest:
Based on the ADB poverty reduction model, review therationality of the investment policy based on testing
significance of effects of transportation improvement on
increasing income of rural households

9Research Question The effect of road infrastructure construction

on poverty alleviation in China’s poor villages.

10Data Source and Extraction
Dataset: World Bank CCAP Village Survey(2003),

Observation unit: village
In total 2459 villagechoose only 1540 villages with net
income per capita under RMB 2000
(US$320) per year

11

Independent Variables
 Variable of interestroadpass: =1 if there is a tarred/paved/cement roadpassing through the village; =0 otherwise

12Criteria for control variables

13

Control variables
 Control variables

percentage of illiterates: propilliter owning a clinic: ownclinic
 distance to water-source: distwat
 percentage of non-farm income: nonaginc
 owning enterprise: ownentpriz
14

Variables and Description
Variable

propilliter

Description
Log form of per capita net income of thevillage in year 2002
if there is a tarred/paved/cement roadpassing through the village
percentage of illiterates among labors

diswatdistance to water-source

kmownclinic

If the village owns a clinic

Yes=1; No=0

nonagincpercentage of non-farm income%ownentpriz

If the village own enterprise

Yes=1 No=0ln(netinc)

roadpass

Unit

Yes=1; No=0%15

Regression Modelln(netinc)=C+a1*roadpass+b1*ownclinic+b2propil
liter+b3*diswat+b4*nonfarminc+b5*ownentpriz

16

Correlation among variables
variables netincome

roadpass

propillit

ownclinic

distwatnonaginc ownentpriz

netincome

1.0000

roadpass

0.13661.0000propillit-0.2509-0.07311.0000ownclinic

0.09900.1279-0.1678

1.0000

distwat-0.1603-0.0855

0.0723-0.03421.0000nonaginc0.17560.1369-0.0230

0.1123-0.0185

1.0000ownentpriz

0.15950.2492-0.0895

0.1273-0.0664

0.19391.000017Preliminary Regression Result
Table: Regression Models of Per capita Net Income (netinc)
Dependent variable (Y): Per capita net income of surveyed villages in 2002.
YLn(Y)Ln(Y)Regressor
(1)
(2)
(3)

Roadpass

0.1069**(0.0264)0.0686*(0.0269)

Percentage of illiterates-0.0076**(0.001)-0.0075**(0.0008)

Ownclinic

0.0990*(0.0388)0.0705(0.0381)-0.0072**(0.0015)-0.0070**(0.0014)(1=road passing, 0=otherwise)

138.4018**(25.6017)

0.1474**(0.0273)

Ln(Y)
(4)

(1=owning clinic, 0=otherwise)

Distance to water source(in 100m)

Percentage of non-farmincome0.0034**(0.0006)

Ownentpriz

0.0899**(0.0302)(1=owning enterprise, 0=otherwise)

1049.189**(15.5744)

6.8265**(0.0176)

6.8737**(0.0398)

6.7776**(0.0423)

Adjusted R2

0.01860.0171

0.09820.1260SER

485.090.53010.50780.4999

1540

1540

1540

1540

Constant
Summary Statistics

No of observations

Note: Standard errors are given in parentheses under coefficients. Individual coefficients are statistically significant at the *5%level or **1% level.

18Discussion-Research Design Data: Cross-sectional Data of CCAP Village

Survey (2003)
Field research in rural areas in 6 provinces
 1541 villages( with net per capita<2000 annualincome RMB) Sampling: multi-stage stratified sampling

19

Discussion-Validity
 Internal Validity


Omitted variable bias
labor force ratio credit

Reverse causality
 Errors-in-variables bias
ambiguous questions: proportion of non-farmincome?
 intentional misreporting: net per capita income peryear?
20

Discussion-Validity(cont.) External Validity

6 separately located provinces- increase
representativeness and avoid convergence Applicable to poor rural areas, but not applicable
to coastal villages
 May be not applicable to the current situation
21

Policy Implication

Maintain “Linking All Villages”
project

Enhance basic public services







Build rural roads to facilitate better accessbetween townships and villages and local
markets

compulsory education
basic healthcarewater supply systems

Promote marketization
Provide preferential policy to stimulate
nonfarm economy
Offer training and privileges to local incomegenerating enterprises

Regressor

Coefficient

Roadpass (1=road passing,0.0686*0=otherwise)
Percentage of illiterates-**

Ownclinic (1=owning clinic,0=otherwise)+Distance to water source (in100m)-**

Percentage of non-farmincome+**Ownentpriz (1=owningenterprise, 0=otherwise)

+**

22

Case study: rural road development
in Yuechi County

Yuechi County profile Location: east part of Sichuan ProvincePopulation: 1.14 million

Area: 1457 square kilometers
 Agricultural county46 townships
 861 villagesRural Road Construction
 The increasing investment on rural roadconstruction
By 2012, the length of motorable road in the ruralarea has reached 1200 kilometers.

 The growing quality of rural transport

operation


270 busses for the regular transport services,
benefiting more than 40 townships

Economic Development with ruralroad construction
In 2012, Yuechi’s agricultural GDP reached 5.57
billion yuan, accounting for almost 40% ofregional total GDP. a 5.7 percent growth overlast year.
 From 2007 onward, there have been a growing
number of roads newly built each yearaveraging
at 186.75 kilometers per year.
 the famers’ net per capita income has been
increased and more than doubled from 3611
yuan in 2007 to 7601 yuan by the end of 2012.
Economic Development with ruralroad construction

Economic Development with ruralroad construction

Discussion
 The circulation of agricultural goods, rural

human resources and lands has been
escalated.
 Production efficiency and transaction
efficiency has been improved by rural roads
connections.
 The rural road construction has changed
local agricultural economy from homegrown
to commercialization.

When it comes to practice, should thepolicymaker prioritize roadinfrastructure to other public project?

31

Data Source and Extraction
Dataset: World Bank CCAP Village Survey(2003) sub dataset: Public Projects

Observation unit: village
In total 2459 villageAfter cleaning missing and redundant
records, 2453 villages remained in thepool32

Regressors and Description
Variable

Descriptionln(netinc)
HasRoadLog form of per capita net income of the village in year 2002
if there was a road/bridge built in the village since 1998

HasIrri

if there was a irrigation project built in the village since 1998

HasWaterif there was a domestic water project built in the village since 1998

HasElcif there was a electricity project built in the village since 1998

HasTlcm

if there was a telecome project built in the village since 1998
if there was a school built in the village since 1998

HasSchool
HasClinic

if there was a clinic built in the village since 199833

Regression Model Specification 1:
lognetinc = c+α1*HasRoad Specification 2:Specification 3:lognetinc = c+α1*HasRoad+ β1*propilliter +β2*distwat+ β3*nonfarminc+ β4*ownentpriz
lognetinc = c+α1*HasRoad+ α2* HasIrri + α3*HasWater + α4* HasElc + α5* HasTlcm+
α6*HasSchool+ α7* HasClinic+ β1*propilliter +β2*distwat+ β3*nonfarminc+ β4*ownentpriz

35

Project effectiveness comparison

Findings:
Findings: Regardless of construction cost, other infrastructure

construction such as clinic, electricity and irrigation is more effective
than building roads on poverty reduction in short term

36

Policy Implication
China should continue the “Linking AllVillages” project. Taking into account thecomparative costs and the villagers’
participation, building infrastructure merits
priority because it is easier to implement andmore acceptable by the villagers.
 Second, besides road construction, otherinfrastructure projects such as electricity
networks and irrigation system should be also
be considered

37

Policy Implication
 Government should promote marketizationin impoverished rural areas.
the local government can formulate preferential
policies to stimulate non-farm economy, andprovide specialized training and privileges to local
income-generating enterprises.

Policy Implication
The government should enhance basic publicservices
Provide free education to poor households to reduce
illiteracy and conduct teacher training programs toenhance education quality;
 Establish clinics to safeguard villagers’ health andenable them to engage more in livelihood projects toaugment income; and Create water supply systems along accessible roads
to reduce villagers’ time and effort in obtaining water,a critical resource for both production and living.
Scope of Future Research Include credit into the regression model Study the effect of transportation

infrastructure on income for rich villages
 Follow-up study on the latest CCAP survey

40Thank You