The consumption benefits of investment in infrastructure: The evaluation of sites-and-services programs in underdeveloped countries

Abstract

The justifications for housing subsidy programs in developing countries often rely upon substantial indirect benefits accruing to program participants (in the form of improved health, earning capacity or employment, or non-market activity). The empirical analysis in this paper suggests that such programs may often be justified solely on the basis of direct impacts. The paper presents a methodology for deriving rigorously the direct Hicksian benefits of housing subsidy programs such as ‘sites-and-services’ and ‘slum upgrading’ projects in developing countries. The methodology is used to evaluate the net benefits of a sites and services project typical of recent urban shelter programs sponsored by the World Bank. The results suggest that the direct benefits of such programs may be substantial. In the particular case analyzed, the rate of return approaches 40 percent.