Linkage Effect

LINKAGE EFFECTS:

The Linkage between Poverty and Infrastructure is depicted by the flow chart below and how an increase in investment can lead to reduction in poverty levels and eradication.

Fig 2.2 Showing the Linkage effect of Infrastructure on Poverty and Growth

To analyse upon how the improvement in infrastructure can lead to growth and in broader terms even Poverty Eradication we shall discuss about the cases where higher investment has lead to economic growth and thereby poverty alleviation. In 2010, a study took in Sawada, Sri Lanka which evaluated the role of irrigation infrastructure in mitigating the negative impacts of poverty using household panels there. . The point estimates derived by the propensity score matching method showed

grow altogether which can be assured if there is appropriate macroeconomic management and good governance. The need of the hour is greater access for the poor to education and health services, water and sanitation, employment, credit, and markets for produce. Additionally, the susceptibility of the poor to economic shocks and natural disasters must be reduced to enhance their well-being and encourage investment in human capital and in higher-risk and higher-return activities. Public policy reforms and investment in physical infrastructure will significantly contribute to the pursuit of socially inclusive development and

While differences in econometric model specifications, data, and definitions call for caution in the interpretation of results across countries, they do lend helpful insights into the connection between physical infrastructure and poverty reduction. A number of studies point to a significant impact of roads on poverty reduction through economic growth. Kwon (2000), analyzing Indonesian data, estimates a growth elasticity with respect to poverty incidence of 0.33 for good-road provinces and 0.09 for bad-road provinces. This implies that poverty incidence falls by 0.33% and 0.09%, respectively, for every 1% growth in provincial GDP. Basically, Provincial roads also appear to directly improve the wages and employment of the poor in a way that studies have shown that 1% increase in road investment is associated with drop of 0.3% in poverty incidence over five years. Typically, the elasticity for income/ consumption expenditure is much smaller than that for poverty incidence.1% increase in road access coupled with schooling results in a 0.32% rise, via growth, in the mean incomes of the poor. Similarly, a 1% improvement in roads with schooling is directly associated with a 0.11% increase in the poor incomes. We can thereby assert that roads significantly reduce poverty incidence through agricultural productivity and nonfarm employment. Benefits accruing more to the poor than the non poor.