Wednesday, January 6, 2010

Road pessimism or optimism....

Courtesy of Roving bandit:
New evidence on African exports - "While improvements in ports and customs and less bureaucracy will help exporters, the impact of improved inland transit is roughly five times greater."
I have not had time to read the paper by Freund and Rocha, but the quoted line intrigues me... I can't believe that the meaning is "the impact of a dollar spent is five times greater."  A quick glance at the working paper suggests it means "a decrease in transit time" has an impact five times greater.  But is that the relevant question?  If it costs $100 million to reduce the transit time by a day by building and maintaining a road, and it costs $10 million to reduce border time by implementing computerized vehicle registration (can't they take snapshot of license plate on iphone and load it straight to Google's African vehicle registration database?) and then the road increases the daily flow of trade by $50 million while the customs improvements increase the daily flow of trade by $10 million, the choice is to go with customs improvements ($1 increase in trade for $1 investment) rather than roads ($.5 increase in trade for $1 investment).