The Impact of Road Development on Household Welfare in Rural Papua New Guinea

In this paper we evaluate the impact of road development on household welfare in rural Papua New Guinea (PNG) between 1996 and 2010, using two geocoded cross-sectional national household surveys and corresponding road maps. We make use of time-variation in road surface type and condition as recorded in PNG's National Road Asset Management System, focusing on routes that connect rural households to urban areas. To tackle endogenous placement of road infrastructure programs, we employ a correlated random effects model that controls for the location-specific average road quality over the period of analysis. We also use a newly developed generalised quantile regression method to investigate whether road works favour the poor. Our estimates show that better roads to nearest towns lead to higher consumption levels and housing quality, and to less reliance on subsistence farming. The effects are stronger among poor and remote households.