The Benefits of India's Rural Roads Program in the Spheres of Goods, Education and Health: Joint Estimation and Decomposition

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Abstract

All-weather rural roads usually improve not only villagers' terms of trade, but also their educational attainments and health. Obtaining empirical estimates of the benefits generated by the first is straightforward, not so those generated by the others. The object of this paper is to estimate the relative sizes of their respective contributions to total benefits in connection with the all-India rural roads program Pradhan Mantri Gram Sadak Yojana, using an overlapping generations model featuring the production and consumption of goods and the formation of human capital in the presence of both morbidity and mortality. Based on survey evidence from upland Orissa in India and Bangladesh, as well as elements of more usual forms of calibration, the model yields a ratio of commercial to non-commercial benefits of about two-to-one in the first generation, falling to three-to-four in the second. This is broadly consistent with the valuations expressed by respondents in the Orissa survey, who ranked the latter benefits at least on a par with the former.