Benefits of Electrification and the Role of Reliability: Evidence from India
38 Pages Posted: 15 Nov 2016
Date Written: November 14, 2016
This paper estimates the welfare impact of rural electrification in India using nationally representative household panel survey data for 2005 and 2012. Analysis based on a propensity-score-weighted fixed-effects model finds that while electrification is associated with a broad range of social and economic benefits, the size of the effects depends importantly on the reliability of electricity service. Gaining access to electricity combined with a reliable power supply is associated with a 17 percent increase in income during the sample period, but gaining access to electricity alone is associated with only a 9.6 percent increase in income. The net gain from both increasing the access rate and reducing power outages in rural India is estimated to be US$11 billion a year. Moreover, India's rural electrification policy appears to be progressive because lower-income households benefit more from access to electricity than higher-income households during the sample period.
Keywords: Economic Theory & Research, Energy and Mining, Inequality, Industrial Economics, Economic Growth, Energy and Environment, Energy Demand
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