Infrastructure and Development: Roads, Power and Phones

How roads, electricity, water and mobile phones connect poor households to markets and opportunities, and why building infrastructure well is harder than it looks.

Infrastructure means the basic physical systems that an economy runs on: roads, railways, ports, electricity grids, water pipes, sanitation and telecommunications. In rich countries, these are so reliable that people rarely think about them. In many developing countries, the infrastructure gap, the shortfall between what exists and what is needed, is one of the biggest barriers to growth. Hundreds of millions of people still live without electricity, most of them in sub-Saharan Africa, and many rural villages are hours from the nearest paved road.

Roads and market access

A road does more than move vehicles. It gives farmers market access, meaning the ability to sell their crops in towns and cities and to buy seeds, fertilizer and goods at lower prices. Without a good road, transport costs can swallow much of a crop’s value, so farmers grow mainly for their own families.

Research on India’s large rural road program, launched in 2000 to connect villages with all-weather roads, found that new roads helped workers move out of farming into other jobs. Studies of railways built in colonial India found that they reduced price differences between regions and made famines less severe, because grain could be shipped quickly to places where harvests had failed.

Electricity

Rural electrification brings light to study by after dark, powers water pumps and machines, and can free women from hours of work. A widely cited study of electrification in rural South Africa found that it increased women’s employment, likely because electric stoves and lighting reduced time spent gathering firewood and cooking. But results vary. Other studies in Kenya found that when households had to pay to connect to the grid, many poor families did not, and their electricity use stayed low. Electricity helps most when it is reliable and when people have the income and opportunities to use it productively.

Mobile phones: leapfrogging

Many developing countries skipped expensive landline networks entirely and moved straight to mobile phones, a process sometimes called leapfrogging. Mobile networks spread far faster than roads or grids and now reach the great majority of the world’s population. Kenya’s M-Pesa mobile money service, launched in 2007, let people send money by text message; one study estimated that it helped lift a measurable share of Kenyan households out of poverty, particularly households headed by women.

Fishermen in Kerala

Economist Robert Jensen studied sardine fishermen along the coast of Kerala, India, as mobile phone coverage arrived in the late 1990s and early 2000s. Before phones, a fisherman returning with his catch had to guess which beach market to visit. Some markets had too much fish, so prices collapsed and fish were thrown away, while others nearby had too little. Once fishermen could call ahead from their boats, they sailed to the markets with the best prices. Wasted fish nearly disappeared, price dispersion between markets fell sharply, fishermen's profits rose and consumers paid slightly less. A simple piece of infrastructure made the whole market work better.

Building it well

Infrastructure is expensive and long-lived, which creates risks. Projects can suffer from cost overruns, corruption and “white elephants”: grand projects chosen for prestige rather than need. Many developing countries also underfund maintenance, so roads crumble and power lines fail just years after construction. Paying for infrastructure is another challenge; governments use a mix of taxes, user fees, development bank loans and partnerships with private companies.

Counting ribbon-cuttings instead of results

Politicians often measure success by how many kilometers of road or new power stations they open. But a road that washes away in the first monsoon, or a grid connection that delivers power only a few hours a day, does little for development. What matters is whether infrastructure is maintained, reliable and actually used.

Key takeaways

The infrastructure gap in roads, power, water and communications is a major barrier to development.
Roads improve market access and help workers move into new jobs.
Electricity helps most when it is reliable and affordable to connect to.
Mobile phones let many countries leapfrog, improving markets and enabling mobile money.
Maintenance, good project choice and honest spending are as important as construction.