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New research has measured the 'wealth effect' of upgrading the infrastructure in poorer sections of cities.

The fast road out of poverty

 

Revamps, such as surfacing roads and joining them to the city grid, dramatically push up prices of the adjoining land and properties, says the study to be published in the journal, The Review of Economics and Statistics. Researchers from the University of Oxford and the University of Toronto measured how households who owned property in the upgraded roads were also allowed to spend more on credit so they could buy items for the home or cars that made them better off.

The researchers examined the effects of a publicly funded infrastructure project in the Mexican city of Acayucan where 28 out of 56 streets joined up by dirt tracks were due to be upgraded. The 28 streets selected to be resurfaced were chosen through a lottery. Surveys were carried out before worked started in 2006 and after the work, in 2009, among households lining the affected roads. The scheme was the first infrastructure randomised controlled trial, with households in streets without the upgrade acting as the control group, says the study.

The publicly funded scheme resulted in some streets receiving asphalt surfacing, designated lanes and parking spaces and, very importantly, roads that were connected to the city grid for the first time. Poor Mexican households who owned properties adjoining the new roads quickly became much wealthier than those in streets without the upgrades.

 Read more on the University website (opens new window)