The impact of road development on poverty in the Lao People’s Democratic Republic

This paper summarizes evidence suggesting that road improvement in rural areas can contribute significantly to lowering the incidence of poverty, improving educational participation of primary school aged children, and reducing rates of illness. This is done in the context of rural areas of the Lao People’s Democratic Republic. It is widely recognized that rural roads in the countries are a major developmental problem. It seems obvious, just by inspecting these roads, that improving them would produce benefits. But demonstrating and quantifying the effects on indicators relevant to the Millennium Development Goals, such as the incidence of poverty, educational participation and health standards, is another matter. The case study uses household level data from the Lao Expenditure and Consumption Survey (LECS) relating to the years 1997-98 and 2002-03. These data indicate that rural areas of the Lao People’s Democratic Republic account for 87 per cent of all poor people in that country. Reducing poverty in that country thus means, primarily, reducing rural poverty. But what works and what does not work in achieving the goal of poverty reduction? This paper is directed at that question and looks at three broadly conceived dimensions of poverty: consumption poverty (meaning expenditure on privately purchased goods and services), educational opportunity and health standards. Consumption poverty measures only the availability of goods and services which people can purchase with their own funds and makes no allowance for the availability of goods and services provided at a collective level, principally by the Government. For this reason, by allowing for such collectively provided items as educational and health services, it is possible to achieve a usefully broad definition of the concept of poverty reduction. The results of this analysis suggest that to effect poverty reduction the most important form of road improvement is the conversion of dry season access roads to all season access. This is in fact the principal form of road improvement that occurred between 1997-98 and 2002-03. Over this same period, the incidence of poverty declined from 42.5 to 37.6 per cent of the rural population. The results of this analysis suggest that about one fourth of the poverty reduction that actually occurred can be directly attributed to this form of road improvement: the conversion of roads which are accessible only in the dry season to roads which are accessible in all seasons. These results therefore suggest that the principal form of road improvement which has occurred in the Lao People’s Democratic Republic in the past has been consistent with the goal of maximizing the rate of poverty reduction. The data also indicate that the improvement of roads affects educational participation and health standards. The results are not as robust, statistically, as those for poverty, but an interesting difference emerges. Whereas the effect on the incidence of poverty are strongest for the upgrading of dry season access roads to all weather roads, educational and health benefits are derived mainly from the provision of dry season access roads to households which previously were accessible only by walking. Over the five year period examined in this paper, very little road improvement of this kind actually occurred in the Lao People’s Democratic Republic. The results suggest that significant educational and health benefits would be derived by providing dry season road access to the 20 per cent of rural households which presently lack it.