Impacts of Improved Infrastructure on Labor Allocation and Livelihoods: The Case of the Jamuna Multipurpose Bridge, Bangladesh

Abstract

The present study econometrically examines the impacts of an improved road transportation system on labor allocation, input use, and livelihood diversification in an economically lagging part of Bangladesh. Before 1998, the northwest part of Bangladesh, home to 22% of nearly 160 million people, was de-linked from the economically advanced eastern part of Bangladesh. On June 23, 1998, the Jamuna Multipurpose Bridge (JMB) on the river Jamuna was opened for use. The bridge has established direct road and rail transportation systems between the northwestern part and the eastern part of Bangladesh. Using these phenomena, and linking the Household Income and Expenditure Survey (HIES) data, HIES2000 and HIES2010, this study elucidates the impacts of improved infrastructure on labor allocation and the input application behavior of the sampled households. Applying the difference-in-difference estimation approach, this study demonstrates that the JMB that has linked the northwest and eastern regions has encouraged labor out-migration, resulting in the most vulnerable day-laborers in both farm and non-farm sectors moving to other jobs with relatively high marginal returns. The improved transportation infrastructure had also increased the daily wage rates, which were lower than the comparison group, and the cropping intensity in the Rajshahi and Rangpur divisions. The study, therefore, concludes that investment in infrastructure can be instrumental in unleashing economic growth and alleviating poverty in the economically struggling parts of developing countries.