Research shows that putting in the proper infrastructure can bolster wealth in the poorer parts of cities.
A study accepted for publication in The Review of Economics and Statistics reported on the outcome of a publicly funded infrastructure project in Acayucan, Mexico.
In an infrastructure randomised controlled trial — the first of its kind — half of 56 streets joined by dirt track were randomly selected to be resurfaced. Homeowners on the streets selected for improvement, as well as those residing on streets without upgrades, were all given surveys before the work began 2006 and again after the work was done in 2009.
In addition to asphalt resurfacing, upgrades included designated lanes and parking spaces and roads being connected to the city grid for the first time.
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Researchers found that poor households adjacent to the fixed roads became substantially wealthier than those on streets that didn’t receive upgrades. The value of properties on land with the new roads increased in value by an estimated 72 percent relative to those with dirt tracks, according to real estate agents’ appraisals.
Beyond the value of their land and properties, the homeowners who benefitted from the upgrades enjoyed improved credit ratings. After 2009, these residents had taken on more home improvement projects and were buying more vehicles and home appliances than they had in 2006.
“This study has clear lessons for other poor districts, showing how the lives of people can be transformed relatively quickly through basic infrastructure improvements,” said study co-author Climent Quintana-Domeque, Associate Professor in Economics at the University of Oxford.
“Not only do they provide good road links, but give poorer households greater financial security. This can open up access to credit, meaning they can buy more basic items for the house or vehicles that make them more mobile, thereby bringing more job opportunities and giving them a better quality of life,” he said.
As co-author Marco Gonzalez-Navarro from the University of Toronto explained, there has been a trend in recent years favoring direct cash transfers as a means of reducing poverty over infrastructure investment.
“For this reason, we were very excited to find the effects of street asphalting,” he said. “For the first time, we showed a direct link between infrastructure investment and poverty reduction.”
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