Impact Evaluation for Armenia’s Rural Road Rehabilitation
As a result of the June 2009 meeting of MCC’s Board of Directors, MCC is not funding any further road construction and rehabilitation. This hold on funding is the result of actions by the government of Armenia that are inconsistent with MCC principles promoting democratic governance. In light of the hold, this impact evaluation is currently being re-designed. Updated information will be posted as soon as it is available.
The Millennium Challenge Corporation’s (MCC) compact with Armenia (the “Compact”) is focused on reducing rural poverty through a sustainable increase in the economic performance of the agricultural sector. Armenia plans to achieve this goal through a five-year program of strategic investments in rural roads, irrigation infrastructure, and technical and financial assistance to improve the supply of water to, and otherwise support, farmers and agribusinesses. MCC funding will be used to rehabilitate high priority rural roads connecting villages to the national highway network. All rehabilitation works will be on existing road links and will include pavement rehabilitation as well as improvements to bridges, drainage facilities, and road safety features.
The impact evaluation will measure the effect of the project on the quality and accessibility of roads, agricultural productivity and profits, and household well-being. Since roads only will be rehabilitated if their economic rates of return (ERR) meet the hurdle rate of 12.5%, communities will be separated into treatment (where roads are rehabilitated) and comparison groups (where roads are not rehabilitated). Using a regression discontinuity design, the evaluators will compare the treatment groups to the control groups to determine the impact of the project.
The graph at left demonstrates the regression discontinuity approach graphically, where hypothetical post-rehabilitation poverty data are plotted against hypothetical ERRs. The figure also displays the fitted regression lines for the “Funded Roads” (the treatment group) and “Unfunded Roads” (the comparison group), where for simplicity, the slopes of the two regression lines are assumed to be the same (although this condition can be relaxed). The estimated impact is the vertical difference between the two regression lines at the ERR threshold value of 12.5%, that is, at the point of discontinuity.
The main source of data will be the Integrated Survey of Living Standards (ISLS), which is a household survey on a broad range of topics. The ISLS will be conducted annually throughout the term of the Compact by Armenia’s National Statistical Service. The core sample of the ISLS includes 768 enumeration areas, each containing 8 households, for a total sample of approximately 6,100 households. Additionally, MCC funding will be used to prepare an oversample of 216 more enumeration areas in rural communities served by the rehabilitated roads, an increase of approximately 1,700 households.