control villages surveyed over the years before and after the road projects were implemented. Poverty in this paper is measured by the daily consumption expenditure needed for an individual to be above the poverty line, where such per capita consumption expenditure is a function of food calorie and other nutritional requirements set by Food and Agriculture Organization (FAO) standards. We define moderate poverty as per capita consumption expenditure required to meet the FAO guidelines of a daily dietary requirement of 2,112 calories, as well as non-food expenditure that is approximately 30 percent of this food expenditure.<sup>28</sup> Similarly, we establish an extreme poverty line using consumption expenditure required to meet a lower calorie requirement of 1,739 calories, with non-food expenditure again about 30 percent of food expenditure. The extreme poverty line is usually 80 percent below the moderate poverty line; the estimated moderate poverty line was Tk.4698 in RRMIMP villages in 2001 and Tk.3984 in RDP villages in 2000.

Table 4 presents the distribution of households across project and control villages over the two survey periods based on the poverty line. In RDP areas, both moderate and extreme poverty declined in project villages, surprisingly without any change in either measure of poverty in control villages. In RDP project villages, about 57 percent of households were moderately poor before the road was paved, while some 48 percent of households were poor after the road was paved, representing a 9 percent reduction of moderate poverty. About a 6 percent reduction of extreme poverty (from 35 percent to 29 percent) was registered in RDP project villages after road was paved. Interestingly, for control villages there was no significant change in poverty over time. In the RRMIMP survey, poverty fell in both project and control villages. Moderate poverty dropped by about 11 percent in project villages, compared to a 12 percent reduction in control villages. On the other hand, an approximate 17 percent reduction of extreme poverty registered in project road villages, against 13 percent reduction in control villages.

Since poverty reduction in project villages is caused by multiple factors, we sought to determine how much of the poverty reduction in project villages was actually due to road improvement. Based on the fixed effects estimates of the returns to consumption due to road improvement (Table 2), we calculated the predicted gains in per capita consumption due to road improvement and added it to the actual per capita consumption level before the project was implemented.<sup>29</sup> The results are presented in Table 5. With the predicted consumption level, we then re-calculated the incidence of poverty in project villages. For RDP project villages, we find that the predicted incidence of moderate poverty is 52

> 28 This percentage varied slightly, depending on the mean share of nonfood to food expenditure for project and control villages in the two samples. 29 The returns to road improvement in household per capita consumption were 11 percent each in both RDP and RRMIMP villages.  These returns were, however, realized after the project was implemented.  The average time to project completion in both RDP and RRMIMP villages was as high as 2 years, although the survey period covers a span of 4 years in both areas.  Therefore, the consumption returns to road investment need to be adjusted for this factor.  The multiplication factor for road-related consumption gains we use, therefore, is one-half of 11 percent.

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