Living on the Edge: Infrastructure Investments and the Persistence of Coastal Cities

Abstract

This paper considers whether large infrastructure investments in hazardous coastal areas continue to be justified by the productivity and amenity advantages these regions confer, and how this assessment may change as the global climate changes. It uses a spatial equilibrium framework and detailed georeferenced data from 2000-2010 to investigate the aggregate and distributional effects of road upgrades in Vietnam, home to one of the world’s most vulnerable low elevation coastal zones. The results suggest that alternative allocations of road investments less strongly concentrated in the low elevation coastal zone would have achieved similar or higher aggregate welfare gains while moving sizable populations out of the most hazardous regions. The paper also presents evidence that one factor contributing to inefficient coastal favoritism may be hysteresis in the spatial allocation of investments as patterns of regional advantage change. Simulations of future sea-level rise show that the benefits of the counterfactual allocations are magnified as projected climate changes take effect. This paper is a part of a Global Research Program on Spatial Development of Cities, funded by the Multi Donor Trust Fund on Sustainable Urbanization of the World Bank and supported by the UK Department for International Development