Pilot Interventions to Increase the Impact of Rural Roads on Factor Accumulation and Productivity in Nicaragua

This research seeks to inform the Nicaraguan government with respect to which complementary interventions are necessary to ensure that households benefiting from a World Bank-financed Rural Roads Rehabilitation Project take advantage of improved infrastructure to create sustainable self-employment opportunities. Prior formative research conducted by the World Bank confirms that lack of access to lumpy investments is a major impediment to factor accumulation, greater productivity, and employment in the context of rural Nicaragua. Formal savings accounts guard against theft, self-control problems, and expectations that their resources are shared with an individual’s social network. By way of a randomized control trial (RCT), we examine the relative effectiveness of different mechanisms for facilitating access to lumpy sums for investment, including savings accounts and productive investment grants. Furthermore, the formative research reveals that rural households are internally constrained by an aspirations deficit. We examine the extent to which the alleviation of this aspirational deficit through an aspirational training improves saving behavior and the effectiveness of investment in income-generating activities.

Question 1. The main evaluation question of the proposed study is the relevance of access to lumpy investments and improved aspirations for rural household in Nicaragua to escape poverty. Specifically, the first research question of the proposed IE concerns the impact of (i) cash grants, (ii) commitment savings accounts, and (iii) aspirational trainings on increased investment in self-employment (e.g., business activity, investment, and profitability), household consumption, and downstream development outcomes. Also of interest are the two main intermediate outcome variables, i.e., savings levels and aspirations.

Question 2. The second question of the proposed IE concerns how the effects vary across geographic proximity to roads which have been already rehabilitated and roads where rehabilitation by the Ministry of Transport of Nicaragua is planned for the upcoming years. In doing so, we aim to capture complementary effects of tested interventions and roads rehabilitation.

Further interesting sub-questions are effect heterogeneity across gender, age, and baseline household income.