Empowering the powerless: Does access to energy improve income inequality?

Abstract

The 2030 agenda for sustainable development makes it a priority for countries to reduce income inequality while ensuring that people have access to affordable, reliable, and modern energy. Up to date, research examining the impact of energy accessibility on income inequality remain scarce. To contribute to knowledge and policy, this study utilizes a comprehensive dataset for 166 countries to investigate the impact of energy accessibility on income inequality for the period 1990–2017. Utilizing a two-stage generalized-method of moment (IV-GMM) approach, the empirical results indicated that access to electricity reduces global income inequality, while access to modern and clean energy increase global income inequality. On spatial accessibility to energy, rural and urban electrification were found to reduce global income inequality; however, the estimated elasticity of urban electrification exceeds rural electrification. The results further revealed that access to electricity, modern and clean energy, as well as rural and urban electrification moderate the impact of economic growth and education to improve global income inequality. The findings also indicated that employment, economic growth, education, gender empowerment, industrialization, and health are some of the potential channels through which access to energy influences global income inequality. Sensitivity analysis revealed that the direct and indirect effect of energy accessibility on income inequality varies between Latin America-Caribbean, Sub-Saharan Africa, South Asia, East Asia & Pacific, Middle East & North Africa, and Europe & Central Asia countries. The findings are robust to alternative econometric estimators and different measures of income inequality. We, therefore, argue that access to energy is a pre-condition for improving global income inequality.