Rural Roads and Local Market Development in Vietnam

Publication Details

Journal of Development Studies, May 2011, v.47, iss.5, pp.709-34. Available From:

Link to Source
Ren Mu,Dominique van de Walle
East Asia and Pacific (includes South East Asia)
Agriculture and Rural Development
Agro-Industry & Marketing, Rural Livelihoods, Rural Roads
Equity Focus
None specified
Evaluation design
Difference-in Difference (DID), Propensity Score Matching (PSM)
Journal Article


This study seeks to assess the impact of rural road rehabilitation and construction on transport-induced local-market development at the commune level in rural Vietnam. Specifically, the authors assess the impact of the World Bank–financed Vietnam Rural Transport Project I (RTPI), implemented between 1997 and 2001. The authors focus on three sets of questions pertaining to average impacts on local market development, cross-commune difference in the project’s impacts on local markets and the structure of the cross-commune differences in impacts.

The analysis uses data from the Survey of Impacts of Rural Roads in Vietnam, which surveyed project (treatment) and non-project (comparison) communes in six of the 18 provinces participating in the programme. Treatment and comparison communes were randomly selected for inclusion, with the survey ultimately consisting of 100 project and 100 non-project communes. The baseline survey was conducted in 1997, and subsequent surveys were conducted in 1999, 2001 and 2003. In addition, 15 households in each commune were selected to complete a household questionnaire. The authors use the household level data to divide communes into those below or above median mean predicted consumption levels. Finally, a project-level database was used to facilitate consideration of project differences in determining programme impacts.

 The authors use propensity score matching (PSM) to match the treatment and comparison communes and a difference-in-differences (DID) estimation method to measure the impact of RTPI. The propensity score matching is conducted using nonparametric kernel matching. A propensity score–weighted difference-in-differences is also constructed to serve as a robustness check. In addition, an ordinary least squares (OLS) regression of commune-specific impacts on commune characteristics is used to examine whether and how initial commune conditions affect programme impacts.

Main findings

The authors assess the mean project impact on a number of factors relevant to local market development, such as the presence and frequency of local markets and the presence of other commercial establishments. The impact on the availability of a variety of services, livelihood diversification and school enrolment rates are also examined. In the short term (by 2001), the only indicator on which RTPI demonstrates a statistically significant impact is the primary school completion rate, which rose by 15 to 25 per cent in treatment communes. By the medium term (2003), however, a number of indicators exhibit significant impacts, including the presence and frequency of local markets and the availability of tailoring and hairdressing services. In addition, significant evidence of livelihood diversification is apparent, with a 2 per cent decline in households relying on agricultural activities for their primary sources of income and a 1.7 per cent increase in the number of households that rely mainly on the service sector.

Concerned about the possibility of significant heterogeneity across communes, the authors also calculate the project’s impacts on each of the treated communes individually, confirming that the impacts vary greatly across communes. The results indicate that impacts are greater for poorer communes, prompting an investigation of the role of initial commune conditions in determining project impacts. The analysis reveals that communes with initially higher values of outcome variables (e.g., greater school enrolment) experience less of an impact than those communes with lower initial outcome variable values, indicating diminishing marginal returns. In addition, a number of commune attributes consistently undermined beneficial project impacts, including high adult illiteracy, a greater distance to the closest market town, a high concentration of ethnic minority households and being located in the North. Those attributes that proved to consistently and positively affect programme impacts were an initial market presence and population density.

A Related Working Paper is: Ren Mu, Dominique Van De Walle., August 2007 "Rural Roads and Poor Area Development in Vietnam" The World Bank Policy Research Working Paper, Number 4340. Available From:

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