Disbursing Emergency Relief Through Utilities: Evidence from Ghana

Abstract

Government transfer programs to distribute food, water, or electricity at low or no cost have been widespread during the COVID-19 global health crisis. How does program design affect the efficiency and distributional implications of these policies? And what design features determine their political popularity? We study these questions in the context of a program to distribute relief through the electric utility in Accra, Ghana, using data from 1,200 households surveyed during the COVID-19 crisis. We find that distributing relief through electricity transfers has significant advantages. It enables an immediate government response to the crisis because it leverages the existing financial infrastructure between the government utility and households. Moreover, theoretical efficiency concerns about in-kind transfers are mitigated because the transfers are inframarginal for most households and electricity credit can be stored, with many even preferring electricity transfers over cash. These advantages do not preclude delays in transfer receipt and the exclusion of some eligible households, and the program is regressive in both design and implementation. The households least likely to receive relief are those who use less electricity, pay a landlord or other intermediary for electricity, or share an electricity meter with other users – all common among low-income electricity consumers in urban settings. Finally, transfer receipt increases support for the governing party, but support for the program drops significantly if even a fraction of its costs are to be recovered through future electricity tariff increases. Concerns around disbursing relief through utility transfers in this context thus arise not from efficiency loss, but from regressivity, distributional challenges, and politicization.