Transport Costs, Comparative Advantage, and Agricultural Development : Evidence from Jamuna Bridge in Bangladesh
This paper studies the effects of a large reduction in transport costs on agricultural development in a developing country, with a focus on the interactions among the comparative advantage and transport costs of a location, and the transport intens...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/500021531164598732/Transport-costs-comparative-advantage-and-agricultural-development-evidence-from-Jamuna-bridge-in-Bangladesh http://hdl.handle.net/10986/29982 |
| Summary: | This paper studies the effects of a
large reduction in transport costs on agricultural
development in a developing country, with a focus on the
interactions among the comparative advantage and transport
costs of a location, and the transport intensity and value
of a commodity. The paper extends the von Thunen model of
land allocation to incorporate costly technology adoption
and comparative advantage based on land productivity. The
theoretical analysis predicts spatial non-linearity in
cropland allocation. A reduction in transport costs leads to
adoption of productivity-enhancing inputs in the
newly-connected region, and an increase in the share of land
devoted to the high-value transport-intensive crop. The
strongest effect is felt in areas that are not too near or
too far from the center and have a higher land productivity
in transport intensive crop. The empirical context of the
analysis is the Jamuna bridge in Bangladesh, which opened in
1998 and reduced the transport costs from the poor
hinterland in the northwest to the capital city (Dhaka) by
more than 50 percent. Using sub-district level panel data,
the paper implements doubly robust estimators in a
difference-in-difference design. The analysis finds that the
construction of Jamuna bridge led to increased adoption of
technology (fertilizer, irrigation, greenness, and cropping
intensity) and reallocation of land from low-value and
nonperishable rice to high-value crops, pulses, and
vegetables. The evidence indicates spatial nonlinearity in
the effects on cropping intensity and the reallocation of
land in areas with comparative advantage in vegetable
production. For cropping intensity, the magnitude of the
effect is large in the intermediate distance (130-150
kilometers) from the bridge. In areas with relatively higher
vegetable productivity, land allocated to rice declined, and
land was reallocated from high-yielding variety rice to
vegetables in the intermediate distance (110-150
kilometers). This improved productive efficiency by aligning
the cropping pattern more closely with comparative
advantage. The bridge thus led to agricultural development
through technology adoption, higher cropping intensity, and
reducing the spatial mismatch between land suitability and
crop choice. |
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