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CHAPTER 6 Conclusion


his research monograph provides a quantitative assessment of the impact of access to rural roads, irrigation, and extension in Nepal using different methods and alternative data sources. Understanding the impact of access to infrastructure and extension services is crucial for policymakers in making public investment decisions as well as formulating development policy strategy, such as that of the Ninth Five-Year Plan. With better information about how strategies have or have not had an impact, future planning and more efficient resource allocation can help improve rural welfare. Although, in principle, the estimation of the impact of access to infrastructure and extension services is paramount for policymaking, signifi- cant econometric challenges complicate the exercise. Our econometric strat- egy builds on the hedonic approach proposed by Jacoby (2000), which relates access to public infrastructure and services to the land value of plot holders using two cross-sections of nationally representative data. We also use a panel of households to investigate the effect of access to irrigation, roads, and agricultural extension on household consumption growth, poverty status, and agricultural income following Dercon et al. (2009). The use of diverse iden- tification strategies reduces the risk of using a narrower set of results driven primarily by a particular methodology.


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Robust across different methodologies are the results that rural invest- ments in roads have welfare-improving effects on households as measured by land values, consumption growth, poverty reduction, or agricultural income growth. We estimate statistically significant impacts of irrigation using a hedonic model in both cross-sections of data but find that the impact is insig- nificant although positive when estimated in a panel household dataset. This inconsistency may be due to measurement inaccuracies of the irrigation vari- able at the household level, which is aggregated from the plot level, rather than to true ineffectiveness. In our hedonic estimates of the effect of exten- sion on land values in 1995/96, we find that access to extension had a posi- tive yet insignificant effect, while our 2003/04 estimates suggest a larger, statistically significant effect. However, in the panel household analysis, we


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