This paper summarizes evidence suggesting that road improvement in rural areas can contribute significantly to lowering the incidence of poverty, improving educational participation of primary school aged children, and reducing rates of illness. This is done in the context of rural areas of the Lao People's Democratic Republic. It is widely recognized that rural roads in the countries are a major developmental problem. It seems obvious, just by inspecting these roads, that improving them would

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... roduce benefits. But demonstrating and quantifying the effects on indicators relevant to the Millennium Development Goals, such as the incidence of poverty, educational participation and health standards, is another matter. The case study uses household level data from the Lao Expenditure and Consumption Survey (LECS) relating to the years 1997-98 and 2002-03. These data indicate that rural areas of the Lao People's Democratic Republic account for 87 per cent of all poor people in that country. Reducing poverty in that country thus means, primarily, reducing rural poverty. But what works and what does not work in achieving the goal of poverty reduction? This paper is directed at that question and looks at three broadly conceived dimensions of poverty: consumption poverty (meaning expenditure on privately purchased goods and services), educational opportunity and health standards. Consumption poverty measures only the availability of goods and services which people can purchase with their own funds and makes no allowance for the availability of goods and services provided at a collective level, principally by the Government. For this reason, by allowing for such collectively provided items as educational and health services, it is possible to achieve a usefully broad definition of the concept of poverty reduction.