Measuring the unintended consequences of infrastructure projects in developing countries

Sam Schulhofer-Wohl and Taryn Dinkelman of Minneapolis Fed have this paper.

They look at the rise in migration due to new infra projects in developing countries. There is a summary of the paper here.

Evaluations of new infrastructure in developing countries typically focus on direct effects, such as the impact of an electrification program on household energy use. But if new infrastructure induces people to move into an area, other local publicly provided goods may become congested, offsetting the benefit of the infrastructure. We use a simple model to show how to measure the net benefit of a place-based program without data on land prices—an indicator that is commonly used to measure congestion in developed countries but that often cannot be used in poor countries because land markets are missing or land prices are badly measured. Our model shows that congestion externalities are especially large when land markets are missing. To illustrate, we estimate the welfare impact of a recent household electrification program in South Africa. Congestion externalities from migration reduced local welfare gains by half.

This is true in many ways especially in countries like India. No matter how much infra you build, it only falls short..

 

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