Transport infrastructure is deemed to be central to development
and consumes a large fraction of the development
assistance envelope. Yet there is debate about the economic
impact of road projects. This paper proposes an approach
to assess the differential development impacts of alternative
road construction and prioritize various proposals,
using Nigeria as a case study. Recognizing that there is
no perfect measure of economic well-being, a variety of
outcome metrics are used, including crop revenue, livestock
revenue, non-agricultural income, the probability of
being multi-dimensionally poor, and local gross domestic
product for Nigeria. Although the measure of transport is
the most accurate possible, it is still endogenous because
of the nonrandom placement of road infrastructure. This
endogeneity is addressed using a seemingly novel instrumental
variable termed the natural path: the time it would
take to walk along the most logical route connecting two
points without taking into account other, bias-causing economic
benefits. Further, the analysis considers the potential
endogeneity from nonrandom placement of households
and markets through carefully chosen control variables.
It finds that reducing transportation costs in Nigeria will
increase crop revenue, non-agricultural income, the wealth
index, and local gross domestic product. Livestock sales
increase as well, although this finding is less robust. The
probability of being multi-dimensionally poor will decrease.
The results also cast light on income diversification and
structural changes that may arise. These findings are robust
to relaxing the exclusion restriction. The paper also demonstrates
how to prioritize alternative road programs by
comparing the expected development impacts of alternative
New Partnership for Africa’s Development projects