The research report on developmental impact of Rural Infrastructure in Bangladesh prepared by the International Food Policy Research Institute (IFPRI) in collaboration with the Bangladesh Institute of Development Studies (BIDS) in October, 1990 is the most important document on the issue. The study has empirically addressed issues in the neglected area of research on how infrastructure affects growth of income and alleviation of poverty in a developing economy. Contrary to the conventional view that development of rural infrastructure is likely to aggravate poverty, it has found that the development of rural infrastructure has far-reaching implications for the alleviation of poverty by indirectly generating income.
The study has focused on household economies in Bangladesh and concentrates on the benefits of infrastructure, particularly for the poorest segments of the population. It has identified, described, and measured the effects of development of rural infrastructure on agricultural production, employment, income, consumption, savings and investment, and market and social development.
Infrastructure affects agricultural production indirectly through prices, diffusion of technology, and the use of inputs. The study finds that the fertilizer prices are 14 percent lower and labor costs 12 percent higher in the developed Villages than in the underdeveloped. Moreover, 105 percent more farmland is irrigated, 71 percent more is sown with high-yielding varieties (HYVs), and use of fertilizer is 92 percent higher in developed villages. The combined effects of wider and more efficient use of new technology as a result of infrastructure development is estimated to have increased agricultural production in developed areas as much as 32 percent.
Infrastructure development indirectly affects the composition of employment by making nonagricultural jobs more accessible to those with better skills and some assets. This leads to a reduction in the use of family labor and an increase in the use of wage labor in agriculture, providing employment for those with marginal or no land.
The most important finding of the study is the profound effect that infrastructure has on incomes of the poor. Overall, estimations based on the most and least developed villages indicate that infrastructural endowment causes household income to rise by 33 percent: income from agriculture increases about 24 percent, that from livestock and fisheries about 78 percent, that from wages almost doubles, but income from business and industries only rises by 17 percent. Most striking, however, is the distribution of these increases: the functionally landless and small farmers gain a larger share of the increases from crops, wages, and livestock and fisheries, while the large landowners capture most of the smaller increase in business and industries. Households in developed areas spend a larger share of this incremental income on non cereal foods, nonfoods, and services, which generates additional rounds of economic growth. According to this study, infrastructure development increases the speed of diffusion of agricultural technology, reduce the cost of marketing, and improves the operation of both input and product markets, through improved linkages with other sectors.
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