Another Lunatic Line? An Economic Evaluation of the Standard Gauge Railway in Kenya

Abstract: This research paper seeks to examine the emerging role of transportation infrastructure on economic activity in low-income countries due to its vital part in facilitating deeper integration of markets, hence fostering inclusive growth and prosperity for the poor. Although its economic causal framework suggests ambiguous results, transportation investments account for the largest share of the World Bank's lending to developing countries. Through an inductive approach, the paper assesses the new Standard Gauge Railway's effects on income in Kenya by looking at regional disparities induced by the railway. This empirical research adopts the Differences-in-Differences estimation and identifies an increase in income attributed to both the construction of the railway and the railway being in operation. When exploring heterogeneity in the data, further significant results disclose that young men residing in rural areas are identified as main economic beneficiaries of the railway. Moreover, additional results on potential channels of the income relationship advance the analysis and provide a versatile picture of the new railway's role in the economy. Linkages to the heterogeneity analysis help explain the results and demonstrate that people living along the tracks have altered their means of gaining an income due to the railway. Together these results provide important insights into the vital role transportation plays in accelerating income levels and tackling the broader challenge of alleviating global poverty.