Regional road development, rural and urban poverty: Evidence from China

The study estimates the impact of road investments on overall economic growth, rural and urban growth, and rural and urban poverty reduction. To achieve these goals, an econometric model that captures the different channels through which road investment impacts growth and poverty is developed and estimated using provincial-level data for 1982–1999 in China. Low-grade (mostly rural) roads have benefit/cost ratios for national GDP that are about four times larger than the benefit/cost ratios for high-grade roads. In terms of poverty reduction, low-grade roads raise far more rural and urban poor above the poverty line per yuan invested than do high-grade roads. Another significant finding of the study is the trade-off between growth and poverty reduction when investing in different parts of China. Road investments yield their highest economic returns in the eastern and central regions of China, while their contributions to poverty reduction are greatest in western China (especially the southwest region).