APPLIED MICRO: The Heterogeneous Effects of Rural Electrification: Evidence from Zambia; Dr Torsten Figueiredo WALTER (New York University Abu Dhabi)

Abstract

Electrification is crucial for economic development. However, where and how it may have transformative effects remains unclear. In light of recent microeconomic evidence on electrification’s disappointing effects, we study the potential sources of heterogeneity underlying these results in the context of Zambia, where a large, country-wide rural electrification program is being rolled out. We develop a novel measure of electrification with high temporal and spatial coverage derived from administrative records on the universe of Zambian primary schools and health centres. We can confirm, first, that hundreds of localities have gained access to the electric grid since 2006. Second, our best estimate of a local average treatment effect that exploits inconsequentially electrified localities is indeed virtually zero across a wide range of outcomes. Third, exploiting two full rounds of the Zambian Population and Housing Census, we document a new, key determinant of heterogeneity: any beneficial effects of electrification are concentrated on localities that have at least one non-residential building in commercial use before electrification, even conditional on locality size. In line with classic theories of agglomeration, we conclude that indivisible investments, such as pre-existing productive building capacity, can determine if rural electrification will cause economic development.