Alleviating Poverty with Pavement?

Around the world, people are increasingly migrating from rural areas to urban centers. Urbanization is particularly evident in developing countries: the World Bank reports that 90 percent of current urban growth occurs in developing nations. Moreover, with an estimated one quarter of the poor in the developing world now living in urban areas, urban poverty is a growing concern for development practitioners.

Despite these global trends, little is known about how the provision of public goods – particularly infrastructure – affects poverty in urban centers. In their 2012 paper, “Paving Streets for the Poor: Experimental Analysis of Infrastructure Effects,” Marco Gonzalez-Navarro and Climent Quintana-Domeque implement a randomized experiment to determine whether paving streets improves standards of living in Acayucan, a metropolitan area in Mexico. The authors find that the provision of infrastructure has a positive, but limited effect on the urban poor.

Between 2006 and 2009, Gonzalez-Navarro and Quintana-Domeque conducted a randomized experiment in Acayucan, Mexico, a city of 105,000 people located in the southeastern state of Veracruz. Municipal leaders permitted the authors to randomly select 28 residential streets for pavement (the treatment group) and an additional 28 streets to remain unpaved (the control group). The authors conducted a pre-intervention survey of approximately 1,200 households and dispatched realtors to appraise property values along the 56 streets. In 2009, Gonzalez-Navarro and Quintana-Domeque conducted follow-up surveys and appraisals.

The authors observe several positive effects among the treatment households. Respondents living on paved streets report greater consumption of durable goods, higher rates of ownership of motorized vehicles, increased investment in home improvements, and greater use of collateral-based credit. The authors find street pavement increases property value by 25 percent, on average, and that “rents on treated streets are 31 percent higher than rents on control streets.” In conclusion, they “interpret these estimates as pointing to local infrastructure affecting homeowners through land value increases. […] Home value increases can explain the expansion of credit and durable good consumption.”

Gonzalez-Navarro and Quintana-Domeque find, however, that street pavement has no impact on other well being indicators. For example, they observe no difference in households’ labor supply or earnings, nor any statistically significant difference in money or time spent on transportation. The treatment households do not report any changes in health conditions or school attendance. The authors also point out that while treatment households use greater amounts of collateral-based credit, they do not change their reliance on other forms of credit, including government loans or informal lenders.

While the authors conclude that Acayucan’s “provision of street pavement reduces poverty, at least as measured by the increases in the acquisition of durable goods, motorized vehicles, and property values,” they do not provide data on home ownership rates or examine the potential negative consequences of increasing property value, such as the displacement of renters.

Gonzalez-Navarro and Quintana-Domeque emphasize that their experiment should be replicated in other urban centers in the developing world to better understand the long-term impacts of infrastructure improvements and other public goods on poverty reduction. Although their work provides important findings for urban policymakers, it also highlights the need for continued research in this field as the trend toward urbanization continues worldwide.

Feature Photo: cc/Iguana Jo