THE DIFFERENTIAL ECONOMIC BENEFITS OF RURAL ELECTRIFICATION IN INDIA: QUANTILE REGRESSION ESTIMATION

Abstract

Rural electrification not only provides affordable modern energy to rural households at a cheaper price but also improves the quality of life and economic development of the rural sector. The welfare gains of electricity are not the same across households. This paper tries to understand who benefits the most from rural electrification - the poor or the rich rural households. The differential effects of rural electrification on household income and expenditures on health and children’s education are estimated using the 2011-2012 IHDS-II survey data applying the quantile regression method. The estimated results show that household electrification increases both household income and expenditure. The higher-income rural households benefit more than the lower-income households from rural electrification. The upper-income rural households gain more in terms of the education of children relative to poor-income households from rural electrification. Rural electrification benefits are higher for median health expenditure households than either for lower or upper quantile households. The larger benefits from rural electrification accrue to the better-off rural households through higher consumption and use of electricity for many productive uses and electrification benefits accrue from multiple channels.