70 B o o s t i n g
P r o d u c t i v i t y i n S u b - Sa h a r a n A f r i ca
BOX 4.3 The Role of Transportation Infrastructure in Agriculture The size of subsistence agriculture can be characterized as the outcome of the interplay between sectoral productivities (in agriculture and manufacturing) and transportation productivity. Agriculture takes place in near or remote rural areas, while manufacturing goods are produced in urban areas. Economic models assume that people devoted to subsistence agriculture live in remote areas and that labor is mobile across regions. The model calibration for Sub-Saharan Africa finds that agricultural productivity improvements and lower costs of intermediate inputs free up labor from the agriculture sector (Gollin and Rogerson 2014). Improved transportation productivity helps individuals move from subsistence agriculture into manufacturing, leaving the share of workers living in the near rural areas unchanged. If productivity improves only in manufacturing, the share of population in subsistence agriculture still declines but more slowly than if the boost were in agricultural or transportation productivity. These findings imply that structural transformation at low levels of development is primarily driven by productivity surges in agriculture and transportation. Economically speaking, a 10 percent increase in agricultural TFP combined with a 10 percent reduction in transportation costs leads to a 14 percentage point reduction in the labor share in subsistence agriculture (Gollin and Rogerson 2014). The welfare effects are significant—comparable to raising consumption per capita in the economy by 62 percent. The pattern of labor allocation observed in low-income countries (that is, a large share of labor in low-productivity agricultural employment) is influenced by high transportation costs and low
infrastructure spending. In Uganda, high transportation costs are reflected in substantial price dispersion: these high costs incentivize individuals to choose locations that minimize transportation costs for their agricultural goods. This explains the larger share of subsistence agriculture because people live in remote areas to be close to their food source (Gollin and Rogerson 2016). This finding is consistent with evidence that poor transportation facilities constrain agricultural growth (Diao and Yanoma 2003) and that higher transportation costs alter the incentives for agricultural investment (Renkow, Hallstrom, and Karanja 2004; Stifel and Minten 2008). Improvement in rural road infrastructure can reduce crop prices in rural markets, and these price effects are stronger in markets farther from major urban centers and in low-productivity areas. After the European Union’s feeder rehabilitation program in Sierra Leone improved the quality of small rural roads, transportation costs declined for traders purchasing agricultural produce from rural markets as well as for farmers bringing their crops to these markets (Casaburi, Glennerster, and Suri 2013). a The better quality of rural roads helped reduce the price of the main staples cultivated domestically in rural markets along the rehabilitated roads—that is, rice and cassava. The price reductions for cassava were larger owing to idiosyncratic factors associated with the crop: (a) cassava sales are less affected by seasonal factors, and (b) cassava is bulkier than other crops to transport. a. The 2009–11 rehabilitation program targeted four districts in three different provinces: Kambia and Port Loko (Northern Province), Kenema (Eastern Province), and Pujehun (Southern Province). These four districts cover 27 percent of the country’s area and 30 percent of its population (Casaburi, Glennerster, and Suri 2013).
using geographic information system (GIS)based panel data on road accessibility of Ethiopian towns and census-based panel data for manufacturing firms from 1996 to 2008 (Shiferaw et al. 2015). Three measures of road infrastructure were considered: (a) total distance traveled during a 60-minute drive, (b) total area accessible during the 60-minute drive, and (c) total travel time from a particular locality to major economic destinations. Local improvements in road infrastructure
are captured in (a) and (b), while (c) measures the connectivity of firms with local or distant markets. The quality of local road infrastructure was positively associated with the number of firms in the locality. For instance, a 1 percent improvement in road infrastructure was associated with a 1.1–1.2 percent increase in the number of firms. The number of firms had no significant relationship with the connectivity of the road infrastructure. However, the size
