Better infrastructure key to poverty reduction

It is estimated that roughly two-thirds of households in Bangladesh have access to electricity. There is almost a consensus that rural roads, electricity and irrigation - rural infrastructure at large - are main tools of pulling people out of poverty. Empirics available on this score seemingly suggest that villages with access to better infrastructure perform reasonably well in terms of socio-economic indicators than villages without such access.

The question is how? Presented below are some of the answers from a household survey. Drawing upon some household level surveys, we can possibly mention a few benefits. First, better infrastructure helps agriculture in a positive way. Cropping intensity is estimated to be higher in developed villages - with better roads and access to electricity -compared to semi- and under-developed village (with or without any one of the two). The reason may be that due to paved roads, developed villages could get inputs in right time and at right prices.

Besides, the same kinds of benefits have been derived from opportunities created for marketing of output and extension networks. Second, the proportion of irrigated land has doubled in developed villages due to better infrastructure. But such mentionable increase could not be the case in other villages. Again, developed villages surpassed all in terms of the adoption of modern technology. Therefore, it appears that rural infrastructure, such as paved roads and electricity, has a close link with productivity.

Non-farm activities get a boost from better infrastructure. Access to infrastructural facilities also helps accumulation of assets and generation of non-farm income.  As infrastructure develops, the share of households accessing credit has also vastly been increased over time. In fact, the change is evident in other villages but not as remarkably as in developed villages. Again, taking per-household credit availability as a criterion in analysis, no major deviation in the trend could be observed. This means, credit availability per household is relatively high in developed villages. These households are ahead of other villages in terms of the accumulation of human capital also (number of years of schooling by household members). It is very significant since infrastructure has enabled the laggards of the past to move ahead while the relatively advanced ones in the past are falling behind due to infrastructural bottlenecks. It proves that better infrastructure helps educational access. And finally, obviously the share of workers engaged in non-agricultural occupations remains to be an increasing function of the development of infrastructure. It is quite likely that paved roads and electricity help credit facility and strengthen the linkage between farm and non-farm impacts. Maybe this is the reason as to why non-agricultural activities are more widespread in developed villages.

Developed villages - having access to paved roads and electricity -  lean more on non-agriculture than semi- or under-developed villages. Within agriculture, the proportion of workers engaged in cultivation and wage labour is relatively low and has fallen over time.  Thus, the more is the access to paved roads and electricity, the more visible becomes the occupational mobility from cultivation and agricultural wage labour to trade/ business and to other non-agricultural activities. The findings seem to be in consort with that observed in other countries, especially in India and China. Second, in terms of multiple occupations, it is observed that the degree is relatively low in developed villages. In fact, it increases with under-development of infrastructure. Infrastructure helps get satisfactory level of income and given a satisfactory income, the substitution effect gets stronger.

It is quite natural that infrastructure impacts upon consumption through mediation of income. In bad or good times, following Engel's Law, households in developed villages consume relatively less rice and more wheat, fish and meat. Besides, expenses on education, housing and others are also relatively high. That is, access to better infrastructure leads to higher per-capita income of developed villages which, in turn, leads to higher consumption of non-rice items.

The main benefits of infrastructure come from marketing of inputs and outputs. Market orientation has increased over time more in developed than in other villages. For example, the share of marketed paddy and other crops in developed villages surpasses that of underdeveloped ones. The reason may be that factors fuelling distress sales have weakened in developed villages possibly due to infrastructural development.

An interaction of electricity and non-farm worker shows that the variable is highly significant in explaining variations in non-farm income. It means that access to electricity enhances productivity of rural non-farm workers and, thus, contributes to increased income. The estimated elasticity on this count is observed to be 0.17, implying that there occurs a rise of income by 17 per cent following the availability of electricity. Similarly, interaction between roads and non-farm workers also has positive impact on income and as per the elasticity coefficient, the income rises by 6 per cent due to access to roads. Overall, access to electricity and roads tend to increase household income by 23 per cent.

Access to quality roads and electricity (or to any of them) is likely to have positive impact on non-farm income of households. The policy implication is obvious: the government should invest in rural infrastructure, especially in construction of roads and providing electricity with a view to raising the income levels of rural households.

The writer is a former Professor of Economics at Jahangirnagar University.

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