Infrastructure and Poverty Reduction - Making Markets Work for the Poor

Abstract

The rural poor's lack of access to product and factor markets leaves them largely bypassed by the growth process. Infrastructure investments complemented by policy and institutional reforms enable markets to develop and function efficiently, thereby mainstreaming the poor. Making markets work for the poor is therefore a key element of a country's poverty reduction strategy. The main factors underlying rural poverty include farm productivity, as well as nonfarm employment and productivity (Ali and Pernia 2003).

Infrastructure investments influence all the three sets of poverty determinants. Road investments, for example, could increase agricultural productivity, nonfarm employment, and productivity, directly raising the wages and employment of the poor, and hence, their economic welfare. In addition, higher productivity and expanded employment lead to faster economic growth, affecting the supply and prices of goods that benefit the poor.