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Despite large amounts invested in rural roads in developing countries, little is known about their benefits. This paper derives an expression for the willingness-to-pay for a reduction in transport costs from the canonical agricultural household model and uses it to estimate the benefits of a hypothetical road project. Estimation is based on novel cross-sectional data collected in a small region of Madagascar with enormous, yet plausibly exogenous, variation in transport cost. A road that essentially eliminated transport costs in the study area would boost the incomes of the remotest households-those facing transport costs of about USD 75/ton-by nearly half, mostly by raising non-farm earnings. This benefit estimate is contrasted to one based on a hedonic approach.

High transport --- Infrastructure investment --- Road --- Road improvement --- Road projects --- Rural infrastructure --- Rural roads --- Transport --- Transport Costs --- Transport Economics, Policy and Planning --- Transport infrastructure

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The authors present a new database of minimum distance road routes connecting 138 cities in 27 countries across Europe and Central Asia. They use it to show that improved road network quality is robustly associated with higher intraregional trade flows. Gravity model simulations suggest that an ambitious but feasible road upgrade could increase trade by 50 percent over baseline, exceeding the expected gains from tariff reductions or trade facilitation programs of comparable scope. Cross-country spillovers due to overland transit are important: total intraregional trade could be increased by 30 percent by upgrading roads in just three countries-Albania, Hungary, and Romania.

Bottlenecks --- Costs --- High Transport --- Initiatives --- Investments --- Road --- Road Improvement --- Road Infrastructure --- Road Network --- Road Quality --- Road Transport --- Roads --- Route --- Routes --- Trans Transit Routes --- Transport --- Transport Costs --- Transport Data --- Transport Economics, Policy and Planning --- Travel --- True

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What effect does distance have on costs for economies at different locations? Exports and imports of final and intermediate goods bear transport costs that increase with distance. Production and trade depend on factor endowments and factor intensities as well as on distance and the transport intensities of different goods; The combination of distance, poor infrastructure, and being landlocked by neighbors with poor infrastructure can make transport costs many times higher for some developing countries than for most others. Drawing on two traditions of economic modeling - Heckscher-Ohlin trade theory and von Thunen's work on the isolated state - Venables and Limao analyze the trade and production patterns of countries located at varying distances from an economic center. Predicting a country's production and trade pattern requires knowledge of the country's location, its factor endowment, and the factor intensities and transport intensities of goods. Venables and Limao define transport intensity and show how location and transport intensity should be combined with factor abundance and factor intensity in determining trade flows. A theory based on only one set of those variables, such as factor abundance, will systematically make incorrect predictions. They report that geography and endowments interact in such a way that the world divides up into economic zones with different trade patterns. Countries close to the economic center may specialize in transport-intensive activities; countries further out become diversified, producing and sometimes trading more goods; countries still further out may become import-substituting (replacing some of their imports from the center with local production); in the extreme, regions become autarkic. More remote locations have lower real incomes. Globalization changes the terms of trade, improving the welfare of regions further out from economic centers, though reducing the welfare of closer regions. Where will a new activity, such as assembly of a new product, locate? Remote locations are disadvantaged if the product has high transport intensity (perhaps because of heavy requirements for intermediate inputs). But the costs of remoteness are already incorporated into the factor prices of those regions, which makes them more attractive. Which location is chosen depends, therefore, on how existing activities compare with the new activity in transport intensity and factor intensity. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to study the location of economic activity. The authors may be contacted at avenables@worldbank.org or ngl4@columbia.edu

Benchmark --- Economic Structures --- Elasticities --- Elasticity --- Exports --- Goods --- High Transport --- Income --- Infrastructure --- Outcomes --- Price Changes --- Prices --- Production --- Theory --- Trade --- Trade Liberalization --- Transport --- Transport Costs --- Transport Economics, Policy and Planning --- Variables --- Welfare

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December 1999 - The median landlocked country has only 30 percent of the trade volume of the median coastal economy. Halving transport costs increases that trade volume by a factor of five. Improving the standard of infrastructure from that of the bottom quarter of countries to that of the median country increases trade by 50 percent. Improving infrastructure in Sub-Saharan Africa is especially important for increasing African trade. Limao and Venables use three different data sets to investigate how transport depends on geography and infrastructure. Landlocked countries have high transport costs, which can be substantially reduced by improving the quality of their infrastructure and that of transit countries. Analysis of bilateral trade data confirms the importance of infrastructure. Limao and Venables estimate the elasticity of trade flows with regard to transport costs to be high, at about -2.5. This means that: The median landlocked country has only 30 percent of the trade volume of the median coastal economy; Halving transport costs increases the volume of trade by a factor of five; Improving infrastructure from the 75th to the 50th percentile increases trade by 50 percent. Using their results and a basic gravity model to study Sub-Saharan African trade, both internally and with the rest of the world, Limao and Venables find that infrastructure problems largely explain the relatively low levels of African trade. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to investigate the effects of geography on economic performance. The authors may be contacted at ngl4@columbia.edu or avenables@worldbank.org.

Elasticity --- Fixed Costs --- High Transport --- Infrastructure --- Infrastructure Investment --- International Transport --- Journey --- Journeys --- Quality Of Transport --- Rail --- Road --- Routes --- Trans Transit Routes --- Transport --- Transport Costs --- Transport Economics --- Transport Economics, Policy and Planning --- Travel --- Trips --- True

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What are the main determinants of transport costs: network access or competition among transport providers? The focus in the transport sector has often been on improving the coverage of "hard" infrastructure, whereas in reality the cost of transporting goods is quite sensitive to the extent of competition among transport providers and scale economies in the freight transport industry, creating monopolistic behavior and circular causation between lower transport costs and greater trade and traffic. This paper contributes to the discussion on transport costs in Malawi, providing fresh empirical evidence based on a specially commissioned survey of transport providers and spatial analysis of the country's infrastructure network. The main finding is that both infrastructure quality and market structure of the trucking industry are important contributors to regional differences in transport costs. The quality of the trunk road network is not a major constraint but differences in the quality of feeder roads connecting villages to the main road network have significant bearing on transport costs. And costs due to poor feeder roads are exacerbated by low volumes of trade between rural locations and market centers. With empty backhauls and journeys covering small distances, only a few transport service providers enter the market, charging disproportionately high prices to cover fixed costs and maximize markups.

Bottlenecks --- Fixed costs --- Freight --- Freight transport --- High Transport --- Journeys --- Road --- Road conditions --- Road network --- Road quality --- Roads --- Rural Development --- Traffic --- Traffic volumes --- Transport --- Transport Costs --- Transport Economics, Policy and Planning --- Transport industry --- Transport sector --- Transport service --- Transport service providers --- Transportation --- Travel time