Journal of Transportation Technologies, 2012, 2, 165-174
http://dx.doi.org/10.4236/jtts.2012.22018 Published Online April 2012 (http://www.SciRP.org/journal/jtts)
Contribution of Rural Roads to Access to- and
Participation in Markets: Theory and Results from
Northern Ethiopia
Torbjørn Arethun, Bharat P. Bhatta
Sogn og Fjordane University College, Sogndal, Norway
Received January 20, 2012; revised February 17, 2012; accepted March 14, 2012
ABSTRACT
Road accessibility is considered to be one of the major factors influencing (or correlated to) rural households’ access to-
and participation in markets. However, there are few studies that investigate this important topic. This paper, therefore,
explores the issue from both theoretical and practical perspectives with household and village level data from Northern
Ethiopia. It is generally assumed that road accessibility significantly contributes to both access to- and participation in
markets by rural households. The results in this study, however, suggest that neither participation in major markets nor
the amount of purchased agricultural inputs use are significantly different for households with respect to the degree of
road accessibility in the study area. Nevertheless, the situation seems somewhat better in locations with good access to
roads. On the other hand, the results in this study confirm that road accessibility significantly contributes to reducing
farm gate prices of manufactured goods and increasing farm gate prices of agricultural goods.
Keywords: Road Accessibility; Access to- and Participation in Markets; Rural Households; Northern Ethiopia
1. Introduction
Governments of developing countries, multilateral or-
ganizations such as the World Bank, the Asian Devel-
opment Bank (ADB) and the International Fund for Ag-
ricultural Development (IFAD) emphasize the role of
rural transport to increase access to- and participation in
markets because markets contribute to division of labor
and product specialization. According to Rural Poverty
Report 2001 of IFAD [1] “Distance to markets and the
lack of roads is a central concern for rural communities
throughout the developing world. The rural poor need
access to competitive markets not just for their products
but also for inputs, assets and technology, consumer
goods, credit and labor.” The poor and remote communi-
ties get larger benefits from a new road in several ways.
On the one hand, road construction and maintenance
might give employment opportunities for the local people;
while on the other hand improved transport reduces the
physical costs of access to resources and markets. Gov-
ernments and donors, therefore, favor building new roads
which allow easier transportation of all products from the
rural and remote poor to ports and markets within and
beyond country frontiers.
The Asian Development Bank [2] postulates that road
accessibility provides access to markets, integrates mar-
kets in different areas, mitigates the risks to which the
poor are often more exposed and improves social welfare
due to the increased accessibility to basic social services.
Providing extensive road access to markets would confer
substantial benefits, much of these going to poor house-
holds on average [3]. It enables them to make better use
of essential services such as health and education and
keep abreast of social, economic and political develop-
ments happening in their country [1]. Moreover, im-
proved market situation reduces the width of price bands
[4] and many people find themselves advantageous to
participate in markets. Ultimately, it may encourage
producing more for markets.
Ethiopia has the lowest road density in the world,
which is even far below the average African standards.
Ethiopia has the total length of classified road network of
about 28,000 km which is equivalent to road density of
4.2 km per 10,000 people and 23 km per 1000 square km
of area [5]. It seems that the current state of the road
network is an obstacle to economic growth and devel-
opment in Ethiopia. Taking this into consideration, the
Ethiopian government has emphasized development of
road transportation since the 1990s. Consequently the
road network has increased in the country. In Tigray, in
particular, walking time to the nearest all weather road
has decreased from 200 minutes in 1991 to 150 minutes
C
opyright © 2012 SciRes. JTTs

T. ARETHUN, B. P. BHATTA 166
in 1998. The roads joining Adwa and Abi Adi with
Mekelle, the capital city of Tigray, Adi Awala with Inda,
Humera and Shiraro with Birkuta are examples of roads
constructed in the late 1990s. In addition, other roads
have existed for a long time in Tigray.
In this context, this study, therefore, investigates rural
households’ access to- and participation in markets in re-
lation to road accessibility in both theory and practice
with household and village level data from Northern
Ethiopia. We have organized the remainder of the paper
as follows. We discuss theory and literature review rele-
vant to the issue in Section 2. We explain data and model
in Section 3. We present results and discuss them in Sec-
tion 4. We conclude the paper in Section 5.
2. Theory and Literature Review
In this section, we review the literature relevant to the
study in this paper. We divide the relevant literature into
three categories, namely, general theoretical framework,
household model and empirical evidence.
2.1. General Theoretical Framework
Provision or improvement of transport services results in
reduction of transport cost and/or travel time which in
turn lead to increased production. Improved transport,
therefore, promotes social and economic development by
increasing mobility and improving physical access to
resources and markets [1]. Fromm [6], World Bank [7]
and SACTRA [8] treat transport as one of the factors of
production. As transport cost decreases, the factor prices
fall resulting in increased demand for input use or more
output supply according to microeconomic theory [9,10].
Bhalla [11] has a similar argument. He goes ahead by
saying that the marginal cost decreases as a result of im-
proved transportation. Local farmers can benefit from a
road when the road reduces the cost of transporting agri-
cultural products to markets and extends the distance to
breakeven locations. This might lead to more intensive
cultivation and increased production of cash crops. Road
transport can further reduce production costs by lowering
prices of delivered inputs, including equipment and in-
formation (for example, through better agricultural ex-
tension services). The ultimate effect is increased net
farm gate prices and increased farm incomes although
the extent to which this happens depends on the competi-
tiveness of the transport service market. All weather ac-
cess to road not only increases income from farming ac-
tivities, but also makes prices more stable and thus en-
ables the poor to improve risk management and reduce
risk. Better access to roads will also improve labor force
mobility and thereby increase households’ job opportuni-
ties.
As the cost of transport declines, the production cost
falls which may result in increased production. Similarly
when travel time is saved, more labor is available for
production, which is equivalent to an increase in labor
supply, resulting in increased production. So the overall
activities expand with the provision of transport services.
Investment in the transport sector can improve access to
economic opportunities by reducing transport costs and
travel time. If markets are reasonably competitive, this
can result in lower prices for freight and passenger ser-
vices. This in turn can lead to lower prices for product
and consumer goods, a spatial extension of the market
for production and consumption goods, higher personal
mobility, and a general higher level of socioeconomic
activities [12]. The provision or improvement of trans-
port services reduces the transport cost of goods, which
results in increase in farmgate prices of agricultural
products while decrease in the farmgate prices of agri-
cultural inputs and other consumer goods. The width of
price band reduces due the improved transportation ser-
vices [4] so the rural people can get double benefits.
2.2. The Household Model
As households simultaneously take decisions regarding
investment, production, consumption, and inputs use, a
household perspective is the most appropriate to investi-
gate the factors influencing (or correlated to) rural
households’ participation in markets. Since a typical
household in resource poor rural economies normally
faces time, production, cash, and budget constraints, the
household model must take those constraints into account
[4]. Our study area, Tigray, is not an exception. We
therefore assume that a representative household in the
study area maximizes utility1 subject to the following
constrains:


max ,,
aml
UX XX
subject to
1) Production constraint:

,,
j
QQLXA
2) Time constraint: l TFX


3) Cash constraint:


ff
PXw FLR


4) Budget constraint:

 
mmaaff
PXPQXPXwFLR

 
where a
X
= Household’s consumption of own agricul-
ture commodity, m
X
= Household’s consumption of
market-purchased goods, l
X
= Minimum time neces-
sary for household and social activities, leisure and so on,
Q = Quantity of agricultural commodity produced by the
household, Xf = Households’ use of fertilizer, L = Total
1It is assumed that a rural household derives utility by consuming
agricultural goods, market-purchased goods and leisure.

T. ARETHUN, B. P. BHATTA 167
amount of time spent on its own farm,
A
= Fixed land
area, = Price of market-purchased goods, w = wage
rate, a = Price of agricultural commodity,
m
P
P
f
P = Price
of fertilizer, T = Total time of the household, F = Time
available for work after allocating the minimum neces-
sary time for household and social activities, leisure and
so on, and R = Total cash (in fixed amount) available
for the household from its own savings, remittances and
so on. Combining the constraints (1), (2) and (4) to get a
full budget constraint:



 


 
,,
or
mm
PX
PX
, ,
0
,, ,,
aaafff
l
afff
mm aal
aml aff
mm aal
lff
PXPQLXAPX
wT XLR
PQLXAPXwTwLR
PXwX
f
Z
UX XXPQLXAX
wLRPXP XwX
RwT XLPX

 



 
 

P

wT

Setting Lagrange function to maximize household util-
ity subject to the full budget constraint and credit con-
straint:
 




U,, ,,
aml afff
mm aal
lff
Z
XX XPQLX AX
wTwLRPXP XwX
RwTXL PX


 
 

P
Differentiating the Lagrangian function with respect to
labor (L) and setting the equation equal to zero gives the
first order condition of household utility maximization as
follows:


 
0
1
aL aL
LL
L
PQ w wPQw
PwMVP w
w



 






or,
Z
L
MV
MVP
where MVPL denotes marginal value product of labor in
their own farms. The above relation clearly shows that
the household wage rate deviates from market wage rate
if the household faces a binding cash constraint (i.e., µ >
0). As a result, the household cannot get rid of shadow
wage rate. As long as the cash constraint is binding (i.e.,
µ ≠ 0), household shadow wage rate is higher than the
market wage rate making the household not beneficial to
participate in a labor market. It is the shadow wage rate
which decides whether a household would participate or
not in a labor market. The same is true with rural house-
holds’ participation in other markets such as fertilizer
markets. If the shadow wage rate lies within “price band”,
the household becomes self-sufficient and will not par-
ticipate in a market [4]. In contrast, the household will
participate in a market if the shadow wage rate lies above
the price band. The relation has an important policy im-
plication that it is the cash constraint that obstructs rural
households in entering into a market of off-farm wage
activities. It is necessary to remove the cash constraint of
rural households in developing countries so that the rural
poor will participate in markets and less dependent on
subsistent farming resulting in less land degradation.
As can be seen above, market participation by a rural
household depends on the width of the price band and the
value of shadow wage rate. The width of the price band
depends on transaction costs, shallow markets, price risk
and risk aversion. Shadow wage rate is determined in-
ternally at the household which depends on household
characteristics and household specific indicators of the
market, resource endowments of the household, and so
on.
The improvement of access to road and transport ser-
vices will increase households’ welfare through four dif-
ferent channels:
Less time is needed to be spent on commuting and
more time can be spent on leisure activities and by
working on their own farm. Better roads will reduce
travel time between home and work for any travel mode,
also walking, and it may open some regions for new and
faster travel modes. A road improvement could make it
profitable for a bus company to start service between a
village and a town. Households living in that village will
then substitute travel mode from bicycle or walking to
bus and thereby reduce their time spent on commuting.
In many households in developing countries, the house-
holds’ head live and work apart from the rest of the fam-
ily for days or weeks and improved access to road could
increase the probability of getting a job close to home.
The reduction in time spent on commuting could either
be spent on leisure activities or working on their own
farm or both. In either case, this will increase house-
holds’ welfare.
More time can be spent on job when commuting time
is reduced. This will increase the households’ income. If
a household member can reduce his time spent on com-
muting by one hour a day, and he wants to spend this
time savings on his paid job, he can increase his working
hours by 10% if the normal working time is 10 hours a
day.
More people will be able to find a job because an ex-
tended local labor market will enhance labor mobility
and increase job opportunities. As mentioned earlier,
better access to road and transport services will reduce
time spent on commuting and thereby widen both the
household’s access to jobs and firms’ access to labor.
There is an upper limit regarding maximum amount of

T. ARETHUN, B. P. BHATTA 168
time an individual is willing to spend on commuting on a
daily basis. If he has to spend more time than this upper
limit, he will choose not to commute. If road improve-
ments or better transport services bring his time spent on
commuting to the nearest city below his upper time limit,
then he will choose to commute. In addition; this exten-
sion of the labor market will also affect city businesses.
The labor supply will increase and the firms in a city can
be more capable of finding persons with skills matching
their vacancies.
Easier access to markets for inputs, goods and services
will narrow the households’ price band and thereby in-
crease their welfare. Road improvements and better
transport services will reduce transportation costs of
bringing farm products to the market and a larger market
will increase the prices and farmers’ revenue. House-
holds will also have better access to input markets and an
increased supply of inputs leads to a price reduction. An
increased market for a household’s output and input
gives higher prices for their output and lower prices for
their input. Road improvements and better transport ser-
vices will reduce time and cost of transporting goods,
services and inputs. Instead of travelling to the nearest
city to sell their farm products or buy their farm inputs,
goods, services and inputs can be provided at better
prices at the gate. In addition to a narrower price band,
this will also save time spent on traveling to a market.
2.3. Empirical Evidence
There are some empirical studies available about the re-
lationship between rural roads and access to- and par-
ticipation in markets [3,13-16]. Reviews and findings of
some of the studies are presented below.
Operations Evaluation Department of the World Bank
[13] examined the socioeconomic influence of improve-
ment of rural roads (Fourth Highway Project) in Mo-
rocco. The study found that there were elimination of
frequent road closures during rainy seasons, reduction in
vehicle operating costs leading to lower prices for freight
and passenger services, and increased traffic volume,
ownership of motorized vehicles, access to market and
social services, and improvement in passenger services.
In addition, they found higher outputs, changes in the
agricultural output mix, increased use of modern inputs
specially fertilizers, improved agricultural extension ser-
vices, increased amount of higher value crops such as
fruits and vegetables, marked growth in off-farm em-
ployment opportunities, improved access to education
and health facilities and increased rural/urban interaction
due to the improved travel facilities.
Lucas, Rutachokozibwa and Tagora [14] carried out an
impact evaluation of the Njombe-Makete Road Project in
Tanzania. The project undertook improvements of feeder
roads, bridge construction, and rural road routine and
spot maintenance. The impact study found an increased
participation of vendors at local markets and an increased
variety of available consumer goods and agricultural
products. The geographic size of markets for agricultural
products increased significantly. There were significant
increases in the sale of all types of agricultural products
as well as increased availability of agricultural inputs.
A household and village-level survey conducted by
IFPRI in Bangladesh provides some evidence of the im-
pact of transport infrastructure on various facets of the
rural economy [15]. The sampling method controlled for
differences in observed natural endowments to focus on
the effects of infrastructure development (of roads in
particular) on several components of the rural economy.
Villages were grouped according to an “infrastructure
index”, an index which measured the degree of physical
access to various markets and services. Villages with
good infrastructure services showed a significantly im-
proved situation in terms of agricultural production, in-
comes, labor demand and health compared to the villages
with poor infrastructure services. Infrastructure was
found to affect agricultural production through improved
prices, diffusion of technology and use of inputs. It was
also found to increase income both from crop production,
and by providing alternative employment; the income
benefits were significant even for landless laborers. The
study also looked at impacts on saving and investment
behavior in the two groups of villages and concluded that
infrastructure may encourage private saving and invest-
ment indirectly through its positive effect on income.
It should be noted, however, that there may be factors
affecting the productivity of the village which were not
controlled for, such as unobserved differences in their
natural endowments. The composite infrastructure index
constructed to compare the villages does not permit
separate examination of the effects of particular types of
infrastructure on development outcomes. The index does
not measure actual access to services, the extent to which
the services are used, or their quality.
A village and household transport survey conducted in
1997 for 40 sampled villages in Andhra Pradesh, India,
provides strong empirical evidence that rural roads con-
tribute to market access and participation [16]. The sur-
vey results of ten households randomly selected for the
household level survey from each sampled village indi-
cate that poor road condition, seasonal road closure, lack
of motorized access, and the high cost of freight delivery
were among the problems of village accessibility in the
unconnected villages. Moreover, road closure during the
rainy season caused product spoilage, delay of freight
delivery, labor unemployment, and so forth. When asked
what impacts were expected from the improvement of
roads, most households in villages both connected and
unconnected with all-weather roads responded with pre-

T. ARETHUN, B. P. BHATTA 169
dictions of more seasonal work taken outside the villages,
higher intensity of cultivation, and expansion of culti-
vated land.
3. Study Area and Data
3.1. Data
The study in this paper uses both primary and secondary
data from Tigray. Figure 1 illustrates a map of Tigray
with road network. Tigray is estimated to have a total
area of 80,000 sq. km. Altitude ranges from 3900 meters
in the Southern zone to 500 meters in the Eastern zone.
Tigray consists of 4 administrative zones, 35 districts
(weredas), 1089 tabias2, and 74 towns. Mekelle is the
capital city of Tigray. The altitude of the study areas
ranges from 1750 to 2750 meters above sea level. The
climate in Tigray is highly unpredictable characterized
especially by unreliable rainfall. The Tigray region faces
sparse, extremely erratic and highly uneven distribution
of seasonal rainfall and frequent drought. Severe
droughts causing famine have affected the region ap-
proximately every tenth year through this century [17].
The amount of rainfall increases with altitude and from
east to west, and decreases from south to north. Average
rainfall varies from about 200 mm in the northeast low-
lands to over 1000 mm in the south western highlands.
Rainfall starts in late June/early July and ends in late
August or early September. Most of the rainfall occurs
from June to September.
Primary data were collected from a sample of 400
households in 16 tabias. Samples were selected adopting
a stratified random sampling approach based on market
access, population density, rainfall, and irrigation pro-
jects. First 16 tabias were selected for a household sur-
vey using a stratified sampling method. Lists of all the
households were obtained from those tabias selected and
simple random sampling approach was adopted to select
ERIYREA
SUDAN
ADI AWALA
ERIYREA
AMHARA
TIGRAYY
SHIRARO
BIRKUTA
OACWA
AXUM
INDA SILASE
INDABAGUNA
ABI ADI
MEKELE
MAYCHEW
L.ASHENGE
WIKRO
APRIL 1996
AFAR
ADIGRAT
Inte rnational Boundar
y
Regional Boundary
Regional Capital
Town
All Weather Road
Dry Weather Road
River
Figure 1. A map of Tigray with Ethiopia in the inset.
25 households from each tabia. The entire analysis in
this paper however considers 372 households only due to
incompleteness of data and respondent dropouts. The
survey was carried out in 2003. In this study, a household
is defined as a group of people that share the same abode
and hearth. It means two brothers living in the same
house but not sharing hearth, were considered as separate
households. Sometimes, family also stands for a house-
hold in this study.
We obtained secondary data used in this study from
Tigray Regional Planning and Economic Development
Bureau which conducted a community survey (tabia
level) in 2001 [18]. The data consist of price information
of various manufactured goods and agricultural products
for different tabias which have different degree of road
accessibility in the region.
The main aim of the study is to investigate road acces-
sibility vis-à-vis access to- and participation in markets
by rural households. We have used chi-squared statistics
to test the independence.
The average distance to the nearest market for all the
communities is 73.1 minutes. The distance ranges from
15 minutes in the nearest to 150 minutes in the most dis-
tant, with a standard deviation of 44.1. While, the aver-
age distance to the wereda headquarters is 113.4 minutes,
which ranges from 15 minutes in the nearest to 300 min-
utes in the most distant, with a standard deviation of 92.1.
This shows that the market is closer compared to wereda
headquarters in average. Most of the communities do not
have access to transport facilities. Hence, pack animals
and human power remain the most important means of
transport from villages to market and wereda headquar-
ters.
Table 1 shows demographic characteristics such as
share of male and female population, household size,
share of female headed households, average number of
children, adults, males, and females per household, share
of households with family members migrated, depend-
ency ratio, etc. In both samples (samples of households
with good and poor access to road, respectively) men
slightly outnumbered women. The average family size
was 4.6 in households with poor access to road to 5.1 in
households with good access to road, which was a sig-
nificant difference at the 10% level of significance.
Households with good access to road have probably
higher average income than households with poor access
because they are able to purchase cheap input and selling
dear products. Higher income means that they can feed a
larger family.
The age of household spouse was lower than that of
household heads. Significantly large share of households
were female-headed in locations with poor access to road
compared to good access to road. The average depend-
ency ratio, measured by consumer per unit of worker,
2Tabia is the local name for a community. Tabia, village and commu-
nity, therefore, are used interchangeably in this paper.

T. ARETHUN, B. P. BHATTA 170
Table 1. Demographic character istics of households.
Demographic
characteristics
Good
access
Poor
access
t-stat.
(p-value)
Share of male population 51.7 52.0 n.a.
Share of female population 48.3 48.0 n.a.
Number of households 297 75 n.a.
Average family size 5.1 4.6 1.96 (0.051)
No of children per household 1.32 1.07 1.77 (0.08)
Average number of adults
per household 2.35 2.35 0.02 (0.983)
Adults above 65 years
per household 0.25 0.28 –0.47 (0.641)
No of females per household 2.47 2.2 1.73 (0.085)
No of males per household 2.65 2.39 1.16 (0.25)
Dependency ratio 2.4 2.2 1.47 (0.144)
Share of female headed
households 26.0 39.0 n.a.
Age of household head 53.7 54.2 –0.27 (0.786)
Age of household spouse 41.4 44.4 –1.41 (0.164)
was 2.3 in the region which varied from 2.2 in house-
holds with poor access to road to 2.4 in households with
good access to road. This difference was not significant
at the 10% level. Though there were few households with
family members migrated outside Tigray, the proportion
was the same for both types of households. Other demo-
graphic characteristics were not significantly different
among the households with good and poor access to
road.
3.2. Status of Road Network and Road
Accessibility in Tigray
Transport infrastructure is poor and underdeveloped in
Tigray. In 1995, there were 1589 km road network in-
cluding 976 km of gravel all-weather roads and 1400 km
of rural roads in the region. This amounts to only 0.31
km of all-weather road per 1000 people, less than half the
average for Africa as a whole [18]. Much of the road
network is in poor condition: 80 - 85 percent of the gra-
vel roads are in need of intensive maintenance, and the
rural roads are not safe enough for motor vehicle trans-
port services. Thus Tigray region as a whole has slightly
greater road density in terms of length of road network
per 1000 people compared to the national average.
In this study, road accessibility is defined as walking
time for a household to reach the nearest all weather road.
We hypothesized that the rural households with good
access to road had better access to- and participation in
markets compared to those with poor access to road. So
all the households are divided into two categories, viz.,
households with good road access and poor road access,
respectively. The average walking time to reach all
weather road was about 39 minutes which ranged from 0
minutes to 5 hours in the study area as a whole. The av-
erage walking time to get to all weather road for the
households with poor and good access to road were 18
and 122 minutes and they ranged from 0 minutes to 55
minutes and from 1 to 5 hours respectively.
4. Empirical Results and Discussion
In this section, we present empirical results regarding
rural households’ access to- and participation in markets,
variations of prices on industrial and agricultural prod-
ucts, and purchased agricultural inputs vis-à-vis rural
road accessibility.
4.1. Access to Rural Roads Vis-à-Vis Access to-
and Participation in Markets
The households in the study area participated in various
markets related to credit, fertilizer and other agricultural
inputs, agricultural products, manufactured commodities,
land renting, oxen renting, and labor. Since most of the
households in Tigray were deficit food producers, they
participated in food markets as net buyers. Among the
markets that households in Tigray engaged in, we exam-
ined households’ participation in labor, credit, and fertil-
izer markets vis-à-vis road access since many studies
have found that these markets have close relationship
with road transportation.
Table 2 shows cross tabulation of rural households
who participated in markets for fertilizer, labor, credit
and transfer income with respect to road accessibility. In
each market, since the calculated chi-squared statistic is
less than the critical chi-squared statistic, even at a lower
confidence level, the null hypothesis that road accessibil-
ity is not associated to rural households’ market partici-
pation cannot be rejected.
4.2. Variation of Prices
Peasant households with poor transportation facilities get
double punishment. They pay a higher price for the
commodities they buy while they get a lower price for
the commodities they sell. Farm gate prices of manufac-
tured goods are significantly higher while farm gate
prices of agricultural products are significantly lower in
localities with poor transportation facilities. This means a
huge price band between the buying and selling prices
for the peasant households with poor transportation ac-
cess [4].
In this section, we compare price variations of manu-
factured goods and agricultural commodities in locations
with and without transportation facilities based on a
community survey undertaken by the Tigray Planning

T. ARETHUN, B. P. BHATTA 171
Table 2. Rural households’ access to- and participation in
major markets.
Good access
to a road
Chi-squared statistic
and inference
Types of markets
Yes No Total
Yes 205 47 251
No 92 29 121
Participation
in fertilizer
markets
Total 297 75 372
χ2 = 1.42
χ20.90,1 = 2.71
χ20.90,1 = 2.71 > 1.11
HO: not rejected
Yes 178 41 219
No 119 34 153
Participation
in labor
markets
Total 297 75 372
χ2 = 0.69
χ20.90,1 = 2.71
χ20.90,1 = 2.71 > 0.69
HO: not rejected
Yes 122 29 151
No 175 46 221
Participation
in credit
markets
Total 297 75 372
χ2 = 0.14
χ20.90,1 = 2.71
χ20.90,1 = 2.71 > 0.14
HO: not rejected
Yes 205 45 250
No 92 30 122
Having
transfer
income
Total 297 75 372
χ2 = 2.21
χ20.90,1 = 2.71
χ20.90,1 = 2.71 > 2.21
HO: not rejected
Bureau (see Appendix). We examined the prices of
manufactured commodities like battery, sugar and soap
and agricultural commodities like teff, wheat, barley, and
millet for households with good vs poor access to a road.
The analyses below show the significant price variation
on these commodities.
We compared two market areas located in two differ-
ent places with and without road network in different
weredas. First we take the example of Adigudom and
Debub with good and poor road access respectively in
Hintalo wereda. The physical distance between Adigu-
dom and Debub was 30 km. The price of one piece of
soap in Adigudom was one birr while in Debub it was
1.5 birr. The price of one piece of soap is 50 percent
higher in Debub compared to Adigudom. Sugar costs 5.5
and 8 birr per kg in Adigudom and Debub respectively.
This is a big variation. On the other hand, there are small
price differences of cigarettes, batteries and matches.
This is because they are low weight items and cost of
transporting them is low compared to the above men-
tioned heavy weight items.
Contrary to the industrial goods, prices of agricultural
products were relatively cheaper in Debub compared to
Adigudom. For example, price of red teff was cheaper by
37.5 birr per quintal in Debub compared to Adigudom. If
Adigudom-Debub road were built properly, the peasants
would be able to sell their agricultural products at rela-
tively higher prices. On the other hand, they could get the
industrial goods at cheaper prices.
If we take another example of Maytsebre and Feyal-
weha with more or less similar road accessibility located
in Tselant wereda. There was a small price variation in
these places compared to the places mentioned above.
This shows that the availability of a road highly influ-
ences price variations.
There were high variations in prices of agricultural
products in market places of Abiabi and Guya. For in-
stance, the price of red Teff was 165 birr per quintal in
Guya, while it was 180 birr in Abiadi. If there were a
road connecting Guya with Abiadi, peasants of Guya
would have easily gone to Abiadi or elsewhere to sell
their agricultural products and could get better prices.
However, we also saw two different markets without
much price variation in agricultural produce and indus-
trial goods. They were Hawzen and Idagaseluse.
There were very high variations of prices in some
weredas in markets of Maychew and Neksege. For ex-
ample, the price of teff was much cheaper in Maychew
(with road) than Neksege (without road). This was
mainly because teff could not be grown in Neksege and it
came to that place from different other places. In Debub
market price of commodities transported on pack animals
was much cheaper than transported by motor vehicles.
This was because people did not include the value of
labor and rent of pack animals in transport cost. But
those who used vehicles for transportation sold their
commodities at high prices and purchased the agricul-
tural products at low prices. We can thus see that the
rural households can reap the double benefits.
4.3. Purchased Agricultural Inputs Use Vis-à-Vis
Road Accessibility
Road accessibility can have an important effect on agri-
cultural inputs use. The availability of reliable transport
to input and output markets stimulates cash-crop farming
in rural areas, and lowers transport costs, which influence
access to off-farm employment opportunities. The transi-
tion from subsistence farming to a market economy is
thus accelerated, so that the poor are better off than
merely being self-sufficient [19]. Because of improved
transport services and lower transport costs, peasants
with good road access use more purchased inputs [15]
such as improved seed, fertilizer, herbicides, pesticides,
and animal medicine in terms of both quantity and value.
More peasants use such inputs because of lower farm
gate price, easy accessibility, agricultural extension ser-
vices, and technological innovation. Table 3 shows that
the proportion of households using purchased inputs such
as fertilizers, herbicides, pesticides, and animal medicine
were higher in locations with good road access than poor
road access. Although more households with good road
access used purchased inputs, the average input use (in
terms of value) per household was not significantly
higher. The households with good road access used
nearly same amount of fertilizer per household but paid

T. ARETHUN, B. P. BHATTA 172
Table 3. Households’ purchased agricultural inputs use
vis-à-vis road access.
Types of
agricultural inputs
Good
access
Poor
access
t-statistic
(p-value)
Credit amount
per household, birr 393 273 1.33 (0.093)
Fertilizer,
kg/household 37 (69%) 36 (62%) 0.21 (0.415)
Value of fertilizer,
birr/household 160 187 –0.96 (0.832)
Herbicides,
birr/household 131 (20%)112 (9%) 0.65 (0.264)
Pesticides 17 (2%) 31 (1%) –0.71 (0.724)
Animal medicine 73 (27%) 63 (17%) 0.19 (0.427)
Note: Figures in the parentheses are the share of households within the
category.
about 17 percent less money compared to households
with poor road access. The reason could be that the farm
gate price of fertilizer was higher for households with
poor road access.
The quantities of fertilizer used by peasant households
with good and poor road access, respectively, were not
significantly different, but the expenditure on fertilizer
was significantly different. The peasant households with
poor access to road spent about 17 percent more money
than those with good access to road even though they
used almost the same amount of fertilizer. It was because
the peasant households with poor access to road paid
significantly higher price in comparison to those with
good access to road. It implies that the farm gate price of
fertilizer was almost 17 percent higher in locations with
poor road access compared to good road access. Most of
the input use, including the value of purchased inputs use,
was not significantly different for households with good
and poor access to road. It should be noted that there may
be many factors, such as unobserved differences in their
natural endowments, affecting the households to use
purchased inputs which were not controlled.
4.4. Factors Associated to Rural Households’
Access to- and Participation in Markets
Factors influencing or correlated to rural farm house-
holds’ access to- and participation in markets may be
broadly divided into four constructs: market and access
to information, household income and resource endow-
ments, household characteristics, and village level vari-
ables and public goods. The important factors are dis-
cussed below.
Road accessibility can have important influence on
markets from both the supply and demand side because it
reduces the imperfect information and transaction costs
[4]. Better road accessibility, for example, could help to
get market information because of lower transaction
costs. It could also encourage people to produce more for
markets. From the lender’s point of view also, road ac-
cessibility could play a positive role because it makes it
easier to get information about the borrower’s activity
and reduce the default by risky borrowers.
In developing countries, credit facilities are concen-
trated in areas closer to cities and thus have better market
access. Distance of household from wereda headquarters
and market access influence households’ participation in
credit markets because of more or less similar reasons
discussed in the case of road accessibility.
Financial institutions routinely require collateral in the
form of land or other fixed assets as a condition for of-
fering loans. In such a situation, household resource en-
dowments such as farm size, labor endowments, oxen
holding and livestock (other than oxen) holding may af-
fect households’ participation in credit markets. They
may increase participation in credit markets compared to
asset constrained households because of the lender’s
evaluation of household’s creditworthiness. On the other
hand asset rich households may not face liquidity con-
straints as long as they could exchange easily their assets
into cash. This may reduce their demand for cash and
hence their decision to participate. The presence of labor
(male or female) may increase intake of higher loan sizes
given that there are no markets for these assets to enable
easy exchange of cash and fixed assets. Availability of
labor implies higher income earning capacity of the
household but also increased capital requirement to
take-up other income generating activities. The size of
land holding by the household may increase the house-
hold’s credit by raising the household’s credit require-
ment as well as credit worthiness. Oxen are one of the
major assets in rural Ethiopia. On the one hand, oxen
holding raises the wealth status and credit worthiness of
the household, while on the other households can hire out
(or sell i.e. distress sell) oxen to earn extra income and
they do not need credit so the sign is ambiguous. The
expected sign of livestock holding is ambiguous just be-
cause one can transform livestock units into liquid assets
as soon as the need arises. There could be differences in
livestock types in this respect, however. Some house-
holds may not like to easily dispose bigger animals such
as oxen, not only due to their economic importance (as
source of traction) but also the status symbol attached in
keeping them. Generally, households endowed with more
income and assets tend to experience lower transactions
and have more flexibility in allocating resources in mar-
ket activities.
The households’ participation in markets is also
closely related to household characteristics such as age,
sex, skill and education level of household head, and
consumer-worker ratio. The younger the household head

T. ARETHUN, B. P. BHATTA 173
are, the more likely s/he is to participate in a market. It is
generally found that the female headed households are
relatively more risk averse and expected to participate
less compared to their male counterparts. If the house-
hold head is endowed with specific skills and education,
its credit worthiness increases. But he/she may have in-
come from other opportunities and may not need to take
credit. The education of household head is one of the
crucial determinants of credit market participation. Edu-
cated and skilled household heads also are more likely to
generate higher off-farm income implying increased ini-
tial loan demand. Dependency ratio may also influence
household’s participation in credit markets because
household with more dependent members in the family
may face temporary cash shortages to meet their con-
sumption requirements. Or it could be explained the
other way round since there are more dependent mem-
bers; the household is relatively more risk averse so the
household members may not participate in credit markets.
Such households could be less credit worthiness too from
the lender’s point of view.
The communities differ in their agricultural potential
and other opportunities. Village level variables such as
rainfall variability, population pressure and access to
irrigation also affect households to participate in a mar-
ket program indirectly.
5. Summary and Conclusions
The households in the study area participated in agricul-
tural products, credit, fertilizer and other agricultural
inputs, industrial products, land renting, oxen renting and
labor markets. Since almost all farm households were
deficit food producers, they participated in food markets
as food buyers. Households with good access to road had
better access to labor, credit and fertilizer markets.
Household resource endowments such as total labor in
the household and owned land, and dependency ratio
significantly influenced the households to decide to par-
ticipate in credit markets. Similarly access to market,
total labor endowments in the household, and locations
where the households were situated significantly influ-
enced the households’ level of participation in credit
markets.
There were significant price variations in locations
with good and poor access to road. Households with poor
access to road are confronted with wider price bands.
Rural households in Tigray used very low purchased
inputs such as herbicides, pesticides, animal medicines,
etc. Use of purchased agricultural inputs was not signifi-
cantly different for households with good and poor ac-
cess to road, indicating that there may be many factors
such as unobserved differences in natural endowments
affecting the households’ use of purchased agricultural
inputs.
Households located in remote areas were less likely to
participate in markets so policies towards integrating
remote areas with urban areas through infrastructure de-
velopment are recommended. As markets appeared vital
for households’ participation in credit markets, govern-
ment’s policies towards promoting market and road in-
frastructure development are desirable. Since land was
one of the significant factors influencing households to
participate in credit markets, credit institutions may re-
quire land as collateral. This may ration out landless
households from credit markets, so policies towards
promoting micro credit institutions that provide loan
without collateral could be advantageous.
REFERENCES
[1] International Fund for Agricultural Development (IFAD),
“Rural Poverty Report,” IFAD, Rome, 2001.
[2] Asian Development Bank (ADB), “Technical Assistance
to the People’s Republic of China for the Socioeconomic
Assessment of Road Projects,” ADB, Manila, 2002.
[3] H. G. Jacoby, “Access to Markets and the Benefits of
Rural Roads,” The Economic Journal, Vol. 110, No. 465,
2000, pp. 713-737.
[4] E. Sadoulet and A. de Janvry, “Quantitative Development
Policy Analysis,” The John Hopkins University Press,
Baltimore and London, 1995.
[5] “Federal Democratic Republic of Ethiopia,” 2001.
http://www.zietlow.com/docs/ ethiopia.pdf
[6] G. Fromm, “Transport Investment and Economic Devel-
opment,” Brookings Institute, Washington DC, 1965.
[7] World Bank, “World Development Report 1994: Infra-
structure for Development,” Oxford University Press,
Oxford, 1994.
[8] SACTRA, “Transport and the Economy,” UK Depart-
ment of the Environment, Transport and the Regions,
2000.
[9] H. R. Varian, “Microeconomic Theory,” 3rd Edition, W.
W. Norton & Company, New York, 1992.
[10] H. R. Varian, “Intermediate Microeconomics: A Modern
Approach,” 5th Edition, W. W. Norton & Company, New
York, 1999.
[11] G. G. Bhalla, “Evaluation of Infrastructural Interventions
for Rural Poverty Alleviation,” UNESCAP, Bangkok,
2000.
[12] D. Schelling and J. Lebo, “Design and Appraisal of Rural
Transport Infrastructure: Ensuring Basic Access for Rural
Communities,” Technical Paper, The World Bank, 2001.
[13] The World Bank, “Morocco-Socioeconomic Influence of
Rural Roads: Fourth Highway Project,” Operations
Evaluation Department, The World Bank, 1996.
[14] K. Lucas, V. Rutachokozibwa and E. Tagora, “The Njombe-
Mekete Road: An Impact Assessment of an ATAP Fund-
ed Road Improvement Project,” Mimeo, 1995.
[15] A. Raisuddin and M. Hossain, “Developmental Impact of
Rural Infrastructure in Bangladesh,” Research Report, In-

T. ARETHUN, B. P. BHATTA 174
ternational Food Policy Research Institute, No. 83, 1990.
[16] Z. Lui, “Economic Analysis of a Rural Basic Access
Road Project: The Case of Andhra Pradesh, India,” Infra-
structure Notes: Transport Sector, The World Bank, 2000.
[17] REST and NORAGRIC, “Farming Systems, Resource
Management and Household Coping Strategies in North-
ern Ethiopia,” NORAGRIC, Norway, 1995.
[18] Tigray Regional Planning and Economic Development
Bureau, “Situation of Road Transport and Communica-
tions in Tigray,” Mekelle, 2001.
[19] Asian Development Bank, “Impact of Rural Roads on
Poverty Reduction: A Case Study-Based Analysis,” ADB,
Manila, 2002.
Appendix: Variation of Prices (in Birr) of
Industrial and Agricultural Products
Price variation of industrial products in some market places
ADGUDOM AND DEBUB
Commodities Adigudom Debub Difference
Matches 0.25 0.25 0
Cigarettes (packet) 3.5 3.5 0
Battery 3.5 3.5 0
Sugar (kg) 5.5 8 2.5
Soap (piece) 1 1.5 0.5
KOREM AND MAY MAIDO
Commodities Korem Maymaido Difference
Matches 0.25 0.25 0
Cigarettes (Nyala) 4 4.5 0.5
Battery 4 4.5 0.5
Sugar 7.5 8 0.5
Soap 1 1.25 0.25
MAYCHEW AND NEKSEGE
Type commodities Maychew Nekseg Difference
Matches 0.25 0.25 0
Cigarettes (Nyala) 3.5 3.5 0
Battery 4 4 0
Sugar 5.5 8 2.5
Soap 1 2 1
DANSHA AND KETEMA NEGUS3E
Commodities Dansha Ketema Neguse Difference
Matches 0.25 0.5 0.25
Cigarettes 3.5 3.5 0
Battery 3 4 1
Sugar 5 6.5 1.5
Soap 1 2.5 1.5
MAYTSEBRE AND FEYALWEHA
Commodities Maysebre Feyalweh Difference
Matches 0.25 0.75 0.25
Cigarettes (Nyala) 3.5 3.5 0
Battery 3.5 4.5 1
Sugar 5.5 7 2
Soap 1 2 1
ABUADI AND GUYA
Commodities Abiadi Guya Difference
Matches 0.25 0.25 0
Cigarettes 4 4 0
Battery 3.5 4 0.5
Sugar 5.5 6 0.5
Soap 1.25 2 0.75
HAWZEN AND EDAGASELUSSE
Commodities Hsezen Edagaselusse Difference
Matches 0.25 0.25 0
Cigarettes 3.5 3.5 0
Battery 4 4.25 0.25
Sugar 6 6.5 0.5
Soap 1.25 1.5 0.25
WIKRO AND ATSEBE
Commodities Wikro Atsebe Difference
Matches 0.25 0.25 0
Cigarettes (Nyala) 3.5 4 0.5
Battery 3.5 4 0.5
Sugar 5.5 6 0.5
Soap 1.25 2 0.75
Price variation of agricultural products in some market places
ADIGUDOM AND DEBUB
Commodities Adigudom Debub Difference
Mixed teff 200.25 168.75 37.75
White teff 243.75 187.5 56.25
Barely 125 97.5 27.5
Wheat 144 157.5 13.5
MAYCHEW AND NEKSEGE
Commodities Maychew Neksege Difference
Mixed teff 150 187.5 37.5
Barely 93.75 75 18.75
Wheat 168.75 150 18.75
Finger millet 120 80 40
ABIADI AND GUYA
Type commodities Abaidi Guya Difference
Mixed teff 225 215 10
White teff 200 185 15
Maize 115 110 5
Barely 140 130 10
Wheat 225 225 0
Finger millet 116 112 4
HAWZEN AND EDAGASELUSSE
Type commodities Hawzen Edagkase Difference
Mixed teff 275 275 0
White teff 240 240 0
Maize 180 180 0
Barely 140 140 0
Wheat 170 170 0
Finger millet 170 170 0
Source: Tigray Regional National State Planning and Economic Develop-
ment Bureau (2001).