1.41% a year in terms of growth.<sup>39</sup> As for the process of concentrationdeconcentration that may arise in the process of development, suggestive evidence from Brazil and Korea supports the Williamson (1965) view. Indeed, after an initial historical phase of concentration that led to the rapid growth of megalopolis like Seoul and Sao Paulo, industry appeared to move first to suburban areas and nearby satellite cities (say, those located at less than 60km or 1 hour of travel) in search for lower wages and land rents. This then created problems of pollution, saturation of infrastructure, aggravated by bad land use planning in areas that did not have the adequate administrative capacity to face such rapid population growth. In a second phase, activity then moved further out to hinterland and rural areas, a process sometimes facilitated by infrastructure investment.

# **Empirical Evidence in a Spatial Framework**

Having discussed the building blocks, we now turn now to analyses that explicitly test the impact of infrastructure policy on development outcomes by integrating the various aspects. We divide them in two groups, depending on whether they explicitly include spatial variables or not.

## _Models Implicitly Including a Spatial Dimension_

Haughwout (2000 and 2002) provide a methodology to indirectly account for the spatial implications of public capital investment when testing its effect on productivity. These papers propose spatial models that look at the effect of public capital on house prices, employment and wages, as a way to incorporate geographic mobility effects. Applying a compensating variations method and using US state and city level infrastructure and household data on house prices and wages to elicit geographic mobility impact, Haughwout (2002) shows that in general the marginal effect of infrastructure is positive but low. Infrastructure investments mainly benefit households, much less so firms, and the aggregate willingness to pay is less than the cost.

Jacoby (2001) represents an example of an application of this method in a developing country context. The paper uses household survey and plot value data to examine the distributional consequences of rural roads in Nepal, a country characterized for most farmers by long and costly travel to reach the main road that leads to market centers. It concludes that enabling better access to market does provide important average benefits, a 10% increase in travel time to market reduces the value of land by 2.2%, but that these benefits are only imperfectly targeted, therefore being “more like a tide that lifts all boats rather than a highly effective means of reducing income inequality”.

## _Models Explicitly Including Spatial Variables_

Accessibility studies are an additional building block towards economic outcomes. An accessibility indicator aims at measuring, for households and firms at each location in a given geographic area, the opportunities available at other locations in terms of employment opportunities or market potential. It does so by inversely

> 39 Note that this does not impede the fact that urbanization may not generate any growth benefits, as has been the case in many African countries for example.

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