How does ethnic diversity affect energy poverty? Insights from South Africa

Abstract

We examine the effect of ethnic diversity on energy poverty in post-apartheid South Africa after several decades of racial segregation. We use both ethnic fractionalisation and polarisation indexes along with a multidimensional energy poverty measure from a five-year South African household-level panel data. Using historical information on ethnic diversity at the provincial level as an instrument to address endogeneity, we find that one standard deviation increase in ethnic diversity is associated with a 0.272 standard deviation decrease in energy poverty. This finding is robust across several quasi-experimental econometric approaches, different measures of ethnic diversity, and alternative cut-offs used to identify energy poor households in a multidimensional construct. Further analyses reveal that ethnic diversity reduces energy poverty only among people of colour, with the largest effect observed among native Black South Africans. Our mediation analysis highlights enhanced job opportunities and increased household incomes as the potential pathways through which ethnic diversity reduces energy poverty.