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The Role of Infrastructure in Reducing Chronic and Transient Poverty :
The Case of JBIC Supported Irrigation Project
in Sri Lanka
Yasuyuki Sawada,
Masahiro Shoji, and Shinya Sugawara
University of Tokyo
2
Research Objective and Strategy
• Is infrastructure an effective and efficient device to reduce poverty?
• Does irrigation infrastructure play an important role in reducing chronic and transient poverty?
• Research strategy: evaluation of a large irrigation infrastructure project in Southern Sri Lanka funded by the Japanese government through JBIC
3
Presentation Outline
• Overview of the project• Data description• Econometric analysis• Results
4
JBIC’s WLB project in Sri Lanka to be examined
• The Walawe Left Bank Upgrading and Extension Project – Initiated in 1997– Funded by the Japanese gov’t through JBIC – Improvements of irrigation systems complete
d in 2001 (Phase I)– On-going extensions (Phase II-)
5
JBIC Institute’s Evaluation Project in Sri Lanka
• “Impact assessment of irrigation infrastructure development on poverty reduction” – Collaboration with IWMI– 858 households were randomly sampled from six
strata of the whole left bank area– Unique household panel data exclusively for the study
• Rare seasonal panel for two years:
Maha(Rainy)
Yala(Dry)
Maha(Rainy)
Yala(Dry)
Oct.2000
2ndJul.
3rdOct.
4thMay2002
5thSep.
1stMay2001
6
Descriptive statistics Fig 1. Average monthly expenditure per adult male
Rainy season: Oct~March (Maha); Dry season: April~Sep (Yala)
500
1000
1500
2000
2500
Oct Dec Feb Apr J un Aug Oct Dec Feb Apr J un Aug
Rs.
per
Adu
lt M
ale
Food Consumption- Irrigated Total Consumption- IrrigatedFood Consumption- Rainfed Total Consumption- Rainfed
7
Descriptive statistics Fig 2. Average monthly Ag. Income per adult male
-500
0
500
1000
1500
2000
2500
3000
Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep
Rs.
per
Adu
lt M
ale
Irrigated Rainfed
Rainy season: Oct~March (Maha); Dry season: April~Sep (Yala)
Average income: 799Rs. in irrigated, 610Rs. in rainfed.
8
Empirical model A
• Estimation equation a la Paxson (1993)• We regress monthly household expenditure (E) on
– constant– log income (lnY)– monthly dummies (M)– interactions of M with irrigation dummies (z).
jijjjjji ZMMYE *)ln()ln( 10
9
Table 5. Estimation result of model A
Food Non Food
Log of average monthly income
(measure of permanent income)
0.139(28.55)
0.235(13.55)
N 9016 8813
t-values in parentheses.
10
Estimation Result of Empirical Model A: Fig 3. Month effects of expenditure by irrigation availability
Rainy season: Oct~March (Maha); Dry season: April~Sep (Yala)
2.000
3.000
4.000
5.000
6.000
7.000
Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep
Food-Rainfed Food- IrrigatedNon Food-Rainfed Non Food- Irrigated
11
Summary of empirical model A
• There are significant differences in the month effects b/w irrigated and rainfed areas:– Chronic poverty is more serious in the rainfed
area– Decreasing month effects of non-food consum
ption in planting season, suggesting transient poverty in both areas
12
Empirical model B
• Consider poverty dynamics, particularly the role of credit explicitly
• Estimation equations (Type 5 Tobit model):Cj
j
jCCZj
Cj
Cj v
X
XZYE
)ˆ(1
)ˆ(lnln ,
0
if Hj < 0, If credit constraint is binding
Nj
j
jNNZj
Nj
Nj v
X
XZYE
)ˆ(
)ˆ(lnln ,
0
if Hj 0. If credit constraint is not binding
jjjj XEHandsinCashH *)(
13
Estimation result of empirical model B:Probit estimation of credit constraint eq. (reduce
d form version of Table 7)Credit Constraint
Coef. Std. Err.
Access to Irrigation Dummy -0.188*** 0.041
Active Organization Membership -0.165*** 0.042
Land Holding 0.120* 0.070
(Land Holding)2 -0.038* 0.022
Monthly Income 1.94E-06 4.99E-06
(Monthly Income)2 -5.03E-11 1.11E-10
Age of Head 0.004** 0.002
Female Head 0.115** 0.055
Head Count of Adult Male -0.051*** 0.019
Head Count of Adult Female 0.030 0.019
Head Count of Children -0.0003 0.014
Constant -1.250*** 0.093
N 9060
14
Table 8 and 9. Estimation result of model B:
Constrained Unconstrained
Food Non Food Food Non Food
Log of average monthly income
(measure of permanent income)
0.162(9.65)
0.202(3.53)
0.135(25.90
)
0.223(11.95)
t-values in parentheses.
15
Estimation result of empirical model B: unconstrained group (Table 5)
Rainy season: Oct~March (Maha); Dry season: April~Sep (Yala)
2.000
3.000
4.000
5.000
6.000
7.000
Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep
Food-Rainfed Food- IrrigatedNon Food-Rainfed Non Food- Irrigated
16
Estimation result of empirical model B: Credit constrained group (Table 4)
Rainy season: Oct~March (Maha); Dry season: April~Sep (Yala)
2.000
3.000
4.000
5.000
6.000
7.000
Oct Nov Dec J an Feb Mar Apr May J un J ul Aug Sep
Food- Rainfed Food- IrrigatedNon Food- Rainfed Non Food- Irrigated
17
Summary of empirical model B • Access to irrigation mitigates :
– probability of binding credit constraint– negative welfare effects of credit constraints
• The monthly effects for the irrigated group seems consistently larger than those for the rainfed group. – Statistically, the difference is significant for un-constrained group– As to the constrained group, the gap of non-food consumption d
uring Yala season is significant – However, credit constraints cannot fully explain the remaining dif
ferences in the month effects between the irrigated and rainfed groups, suggesting that irrigation accessibility reduce poverty through multiple paths other than improvements in credit accessibilities.
18
A test of the model structure
• We test the validity of Paxson (1993) structure by using the following framework:– Examine whether household expenditure is sensitive to income change
s, treating the change as an endogenous variable– Investigate the coefficients on income variability π where the lack of cre
dit accessibility will enhance vulnerability even with irrigation.
Cj
j
jCj
CCj
Cj X
XAYE
)ˆ(1
)ˆ(lnln 0
Nj
j
jNj
NNj
Nj X
XAYE
)ˆ(
)ˆ(lnln 0
if Hj < 0, If credit constraint is binding
if Hj 0. If credit constraint is not binding
jjjj XEHandsinCashH *)(
19
Table 11 and 12 A test of the model structure
t-values in parentheses.
Constrained Group
Unconstrained Group
FoodNon Food
FoodNon Food
The smoother parameter π
Ratio of income earned in month to average monthly income
-0.02(-0.75)
0.21(2.12)
0.002(0.41)
0.003(0.21)
Permanent incomeAverage monthly income 0.14
(3.43)0.62(3.69)
0.17(10.82
)
0.25(7.91)
20
Concluding remarks• Irrigation reduces chronic poverty by enhancing permane
nt income possibly through improving productivity of agriculture.
• Access to Irrigation enhances credit availability of households– Theoretically, this will mitigate the negative welfare effects arisin
g from seasonality, i. e., transient poverty
• However, credit constraints cannot fully explain the remaining differences in the month effects between the irrigated and rainfed groups.– This suggest that irrigation accessibility reduce poverty through
multiple paths other than improvements in credit accessibilities.
21
Thank you very much!
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