Electricity Access and Structural Transformation: Evidence from Brazil's Electrification

69 Pages Posted: 16 Mar 2020

See all articles by Fidel Perez‐Sebastian

Fidel Perez‐Sebastian

Universidad de Alicante - Department of Economic Analysis

Jevgenijs Steinbuks

World Bank - Development Research Group (DECRG)

Jose Gustavo Feres

Institute of Applied Economic Research (IPEA)

Ian Michael Trotter

Universidade Federal de Viçosa (UFV)

Date Written: March 13, 2020

Abstract

This study proposes a novel supply-side mechanism driving economic structural transformation: grid electrification. Increasing electricity availability affects the reallocation of inputs to more productive activities through generating higher returns and lowering entry costs in sectors with greater infrastructure intensity. The results of modeling and econometric analysis based on Brazil's historical data over the period 1970-2006 confirm that the manufacturing sector benefits the most in these two dimensions, followed by services and agriculture. The expansion of electricity infrastructure explains about 17 percent of this process and 32 percent of the observed increase in GDP per capita. Simulations of a multisector neoclassical growth model with heterogeneous firms help assessing the effectiveness of different electrification policies.

Keywords: Energy Policies & Economics, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Food & Beverage Industry, Common Carriers Industry, Construction Industry, Business Cycles and Stabilization Policies, General Manufacturing, Plastics & Rubber Industry, Food Security, Electric Power, Economic Theory & Research, Industrial Economics, Economic Growth

Suggested Citation

Perez Sebastian, Fidel and Steinbuks, Jevgenijs and Feres, Jose Gustavo and Trotter, Ian Michael, Electricity Access and Structural Transformation: Evidence from Brazil's Electrification (March 13, 2020). World Bank Policy Research Working Paper No. 9182, Available at SSRN: https://ssrn.com/abstract=3554091

Fidel Perez Sebastian (Contact Author)

Universidad de Alicante - Department of Economic Analysis ( email )

03080 Alicante
Spain

Jevgenijs Steinbuks

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Jose Gustavo Feres

Institute of Applied Economic Research (IPEA)

Av. Pres. Antonio Carlos , 51 - 17 andar
Rio de Janeiro, RJ, 20020-010
Brazil

Ian Michael Trotter

Universidade Federal de Viçosa (UFV)

Rua Padre Anchieta, 90
504
Viçosa, Minas Gerais 36570-242
Brazil

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