Efficiency Vs. Equity of State Electricity Distribution: Evidence from an Indonesia Village

Abstract

The purpose of this paper is to analyse the determinants of household access on State electricity at the village level in Indonesia. Access to State electricity differs significantly between provinces in Indonesia, as well as between rural and urban areas. This study utilises data at the village level known as Potensi Desa or PODES, for the time period between 2005 and 2011. Panel data regression is performed to estimate the impact of village's remoteness as well as economy and social heterogeneity among communities in villages. By controlling village’s characteristics, this study finds that the number of households utilising State electricity are lower in villages where: (i) they have low population density, (2) are located in remotes areas, and inhabitants have limited access to economy-generating activities. Access to State electricity is significantly better in the region where potential economic activities are mostly non-agricultural. As compared to a previous study that focuses on ethnic heterogeneity, this study found that in villages where the community comprises of more than two ethnicities and more than two difference religions, households access on State electricity is higher than the villages where there is no social heterogeneity. This study concludes that State electricity distribution meets efficiency principle, but not equity or universal distribution.