Enlarged scars: The effects of economic policy uncertainty on electricity accessibility and urban-rural disparity

Abstract

Using a comprehensive dataset spanning 22 countries from 2000 to 2020, this study investigates the influence of economic policy uncertainty on electricity accessibility and the urban-rural gap in accessibility, employing a fixed-effect model. Our research provides several new contributions to the existing body of knowledge. First, heightened economic policy uncertainty is linked to reduced electricity access in both urban and rural areas, and it also correlates with an increase in the disparity between these regions. Second, the relationship between economic policy uncertainty and electricity access is not uniform across different levels of accessibility. Specifically, a negative relationship is evident when accessibility is low, but this effect becomes insignificant when access levels surpass the median (50th quantile). While the positive association between economic policy uncertainty and the urban-rural gap is present, it does not intensify as the disparity widens. Third, a mechanism analysis reveals that policy uncertainty contributes to government corruption, further hindering electricity access and deepening regional inequalities. The analysis also highlights how economic policy uncertainty can exacerbate corruption, compounding access issues. Finally, green finance emerges as a mitigating factor, alleviating some of the adverse effects of policy uncertainty. These results provide a deeper understanding of the intricate dynamics at play and suggest that carefully crafted policies can help offset the negative consequences of economic policy uncertainty.