Public Disclosure Authorized CONNECTING THE DOTS: TRANSPORT, POVERTY, AND SOCIAL Public Disclosure Authorized INCLUSION - EVIDENCE FROM ARMENIA December 2017 Transport and ICT Global Pracce EUROPE Public Disclosure Authorized Public Disclosure Authorized Connecting the Dots: Transport, Poverty, and Social Inclusion - Evidence from Armenia December 2017 Transport and ICT Global Practice EUROPE CURRENCY EQUIVALENTS (Exchange Rate Effective November 1, 2017) Currency Unit = Armenian Dram (AMD) AMD 486,671 = US$1 US$ 0,00021 = AR$ 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Regional Vice President:Cyril Muller Country Director: Country Director:Mercy Miyang Tembon Senior Global Practice Director: Senior Global Practice Director:Jose Luis Irigoyen Practice Manager: Practice Manager:Juan Gaviria Task Team Leader(s): Task Team Leader(s):Steven Farji Weiss Standard Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. 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ACRONYMS ADB Asian Development Bank ASA Analytical and Advisory Services CSC Community Score Card DMSP Defense Meteorological Satellite Program ECA Europe and Central Asia FGD Focus Group Discussion GDP Gross Domestic Product GIS Geographic Information System GNSS Global Navigation Satellite System GNI Gross National Income GPS Global Positioning System GTZ German Agency for Technical Cooperation (Deutsche Gesellschaft für Technische Zusammenarbeit) KII Key Informant Interview ICR Implementation Completion and Results Report ILCS Integrated Living Conditions Survey IMF International Monetary Fund IRI International Roughness Index LRIP Lifeline Roads Improvement Project LRNIP Lifeline Roads Network Improvement Project MAI Market Accessibility Index MCC Millennium Challenge Corporation M&E Monitoring and Evaluation MTAD Ministry of Territorial Administration and Development NOAA National Oceanic and Atmospheric Administration NGO Nongovernmental organization NSSRA National Statistics Service of the Republic of Armenia NTL Nighttime Light SDG Sustainable Development Goal SMEs Small and Medium Enterprises RAI Rural Accessibility Index UNDP United Nations Development Program VIIRS Visible Infrared Imaging Radiometer Suite WDR World Development Report ACKNOWLEDGEMENTS This report was prepared by a World Bank by a team led by Steven Farji Weiss (Economist) and comprising Rodrigo Archondo-Callao (Senior Road Engineer), Xavier Espinet Alegre (Transport Specialist), Kadeem Khan (Junior Professional Associate), Mathilde Lebrand (Economist), Nora Mirzoyan (Operations Consultant), and Irina Tevosyan (Senior Program Assistant). Special thanks go to the Study´s advisors Moritz Meyer (Economist), Christoph Aubrecht (Senior Projects Officer), Giorgia Demarchi (Social Scientist), Atsushi Iimi (Senior Transport Economist), Osman Kaan (Consultant), Carolina Monsalve (Senior economist), Carlos Rodriguez Castelan (Senior Economist), Benjamin P. Steward, (Geographer) and Tara Vishwanath (Lead Economist). The team would also like to thank Mercy Miyang Temblon (Country Director), Juan Gaviria (Practice Manager), Sylvie K. Bossoutrot (Country Manager), Laura Bailey (Lead Social Development Specialist), Carolina Sanchez-Paramo (Senior Director) and Sarah G. Michael (Program Leader) for their continued support and strategic guidance. Finally, the core team is also very thankful to Armenia-based consultants Aram Gevorgyan, Artak Piloyan, Eduard Davtyan, and Ada Babloyan for their data collection efforts, fieldwork, and analysis, which this study relied extensively on. The team would also like to acknowledge the support and invaluable contributions made by representatives of the Government of the Republic of Armenia, specifically the Ministry of Transport, Communication and Information Technologies, the Ministry of Territorial Administration and Development, and the National Statistical Service of the Republic of Armenia, and the local communities surveyed as part of this report. TABLE OF CONTENTS Executive Summary ....................................................................................................................................i Introduction .................................................................................................................................................1 Section 1: Country Context .......................................................................................................................3 Armenia: Evolution of Poverty, Economic, and Demographic Indicators ..................................................3 Section 2: Conceptual Framework............................................................................................................7 Conceptualizing Household Welfare through a Transport Lens ...............................................................7 Section 3: Literature Review on Rural Transport, Poverty, and Local Economic Activity ................12 Assessing the Effects of Transport Infrastructure Investments ..............................................................12 Impact Evaluation Approaches ...............................................................................................................14 Using Satellite Imagery as a Proxy for Local Economic Activity .............................................................15 Section 4: Accessibility Analysis ............................................................................................................16 A Snapshot of the Road Sector in Armenia ............................................................................................16 Assessing Market and Service Accessibility as a Determinant of Welfare in Armenia ...........................18 The Spatial Relationship between Poverty, Road Condition, and Accessibility ......................................25 Interpretation of Findings ........................................................................................................................26 Section 5: Examining the Relationship between Transport, Poverty, and Local Economic Activity: Evidence from the LRIP................................................................................27 Overview of the LRIP and Prior Research ..............................................................................................27 Characterizing the Area of Influence of the LRIP ...................................................................................29 Source: MTAD database 2015. ..............................................................................................................31 Qualitative Analysis: Assessing the Long-term Outcomes of the LRIP from a Social and Poverty Perspective ..........................................................................................31 Methodology and Assessment Matrix .....................................................................................................32 Sampling .................................................................................................................................................32 Participant Profile .................................................................................................................................33 Summary of Findings ...........................................................................................................................33 Nighttime Lights Analysis: Exploiting Luminosity Data to Measure Local Economic Activity ..................39 Description of Methodology and Specification Strategy .........................................................................41 Structure of the Data ..............................................................................................................................42 Evidence on Changes in NTL Per Capita ...............................................................................................42 Section 6: Lessons Learnt and Directions for Future Research..........................................................45 Conclusions and Policy Recommendations ..........................................................................................48