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Abstract

This study attempts to quantify the links between infrastructure investment and poverty reduction using a multi-region general equilibrium model, supplemented with household survey data for the Greater Mekong Subregion (GMS). Infrastructure investment is an important step in economic development, with improvements in transportation infrastructure boosting economic opportunities throughout the region, for example by significantly reducing travel times and costs. In this study, we concentrate on quantifying the effects of some of the key linkages between upgraded infrastructure, economic growth and poverty reduction. We model the impact of both reducing transport costs and improving trade facilitation in the GMS region. Our findings suggest strong gains to the GMS countries as a result of infrastructure development and trade facilitation. The national poverty headcount falls by between 4% and 5% in the countries examined. However, the impact on various segments of these populations is rather different, depending on factor returns. Across the board, skilled wages rise by more than unskilled wages in the region and this tends to benefit the urban households more than rural ones.

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