The Impact of Infrastructure on Agricultural Productivity

Literature indicates the significance of rural infrastructure in improving agricultural productivity in developing countries. Accordingly, the absence or inadequacy of rural infrastructure in the Philippines has been cited as a major reason for its low agricultural productivity. This paper tried to find an empirical basis for the perceived link between rural infrastructure and agricultural productivity. The estimation done in this paper intended to provide an empirical basis for the hypothesis that deficiencies in rural infrastructure have an adverse impact on agricultural productivity. The empirical results showed a significant link between rural infrastructure and agricultural productivity. Specifically, electricity and roads are significant determinants of agricultural productivity. Rural roads provide the important connectivity with growing markets to rural areas; they also lessen input costs and transaction costs of rural producers and consumers. Access to electricity, on the other hand, creates various income-earning opportunities for rural households. Rural areas with good road infrastructure and accessibility to electricity would tend to experience higher growth rates of agricultural productivity than those areas with inadequate roads and energy. Moreover, regions with high infrastructure investments tend to have higher economic growth. Improving the fiscal and financial capacity of local government units (LGU) should be high in the agenda of policy makers in order to improve LGU capacity to provide better local infrastructure. The LGU also need to develop their capacity for better planning and programming of local resources, and implementation of local infrastructure. Firms and households need cheap, safe, and reliable power supply. Thus, policy makers should focus on the sustained implementation of the electric power reform program to provide a more stable power supply and lower energy prices in the future.