Experimental Evidence on the Demand for and Costs of Rural Electrification

44 Pages Posted: 1 Jun 2016

See all articles by Kenneth Lee

Kenneth Lee

University of California, Berkeley - Department of Agricultural & Resource Economics

Edward Miguel

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

Date Written: May 2016

Abstract

We present results from an experiment that randomized the expansion of electric grid infrastructure in rural Kenya. Electricity distribution is the canonical example of a natural monopoly. Randomized price offers show that demand for electricity connections falls sharply with price. Experimental variation in the number of connections combined with administrative cost data reveals considerable scale economies, as hypothesized. However, consumer surplus is far less than total costs at all price levels, suggesting that residential electrification may reduce social welfare. We discuss how leakage, reduced demand (due to red tape, low reliability, and credit constraints), and spillovers may impact this conclusion.

Suggested Citation

Lee, Kenneth and Miguel, Edward and Wolfram, Catherine D., Experimental Evidence on the Demand for and Costs of Rural Electrification (May 2016). NBER Working Paper No. w22292, Available at SSRN: https://ssrn.com/abstract=2786470

Kenneth Lee (Contact Author)

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

Edward Miguel

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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