Three impirical essays on rural development and poverty alleviation in Lao PDR

Abstract

This dissertation consists of three empirical essays with main objective is to find out the way to eradicate poverty or to discover factors that influencing poverty alleviation in Laos, particularly in the rural areas. In the first essay, the author presents overviews of Rural Development and Financial Reform and Its Impact on Poverty Alleviation in Laos. The second essay examines the impact of road investment project on poverty alleviation in Laos; and the last essay analyzes the impact of irrigation investment project on poverty alleviation in Laos. The abstract of each essay is presented below Chapter 1: Rural Development and Financial Reform and Its Impact on Poverty Alleviation in Laos The paper estimates the effects of financial policy reform through the effect of loans on household expenditure as proxy for poverty by taking the endogeneity of loans into account. While many previous studies have attempted to estimate such effects based on a restrictive distributional assumption, this study applies a unique identification strategy to resolve the problem of endogeneity by applying 2SLS. In this identification strategy, the study uses LECS data collected before and after the policy change, and uses a unique instrument of the policy reform on state-owned commercial bank. The results show that financial policy reform leads to increase in amount of loans; and such amount of loans has positive effects on household expenditure. This evidence suggests that reforming the financial policy on state-owned commercial bank may have positive effects on household expenditure that may reduce poverty among the households. Chapter 2: Impact of Road Investment Project on Poverty Alleviation in Laos Rural roads have been widely known as champion for poverty alleviation instruments. Connecting to roads provides market access opportunities, develop market linkage, and improve farm production through technology improvement. This circulation ensures a stable income; later improve living standard and then poverty reduction. In Laos, road networks are extremely poor, many districts lack roads linked to the main national transportation. The paper will find out the mechanism of how the rural roads could contribute to the improvement of household livelihood, and standard of living. Difference in Differences (DD) method will be used in this analysis. The results confirm that the villages with road access may increase their total income around 14.9% compared to the ones without road access, and the result consistent with previous study as well. The recommendation for government to curve the poverty in Laos is to incorporate the connecting rural road plan into the national development strategy to allow the rural communities to have easy access to the main infrastructure and to be mainstreamed into the country economy to improve their daily activities and their livelihood Chapter 3: Impact of Irrigation Investment Project on Poverty Alleviation in Laos Water demand is continue to increase, particularly in agricultural and environmental sections. For this reason, it will create more competition for the limited and scarce water resources. Therefore, choosing an appropriate approach to manage water resources in distributing and allocating to attain sustainable agriculture is critical role for every country worldwide. The most well known tool to preserve or to store water is irrigation. This chapter wants to find out the impact of irrigation on farmers’ income, especially the income from rice which is the main crop of rural people in Laos. Different-in-Differences method was employed to find out regression results. The Different-in-Differences estimated by pooled OLS of the effect on log of total rice products with some control variables point out that the coefficient of interest (treatment) is 0.059 with a positive sign but statistically insignificant. The result implies that irrigation has no impact on rice products or the irrigation does not increase rice products as our expectation, even so it increases household’s income. Finding indicates that type of irrigation, location of operation headquarter, management system or government are crucial factors for explaining the impact of irrigation on rice products in Laos.