The Impact of Rural Electrification on Life-Line Consumers: Empirical Evidence from Bangladesh

Abstract

Access to electricity accelerates the pace of social and economic development of a country in addition to boosting the overall living standard of people. Ensuring universal access to electricity remains a challenge in Bangladesh because the households outside electricity coverage are often poor and/or reside in remote or rural areas. This paper empirically examines the causal impact of rural electrification on the household welfare of life-line or lowest-tier electricity consumers of rural Bangladesh who are mainly lower-income households group. We use the Bangladesh Institute of Development Studies (BIDS) 2018 household survey data, collected from villages with and without access to electricity. The sample consists of 511 electrified and 325 non-electrified households as well as covers all eight divisions of the country to account for geographical variations. We employ a recently developed quasi-experiment econometric method, namely the Covariate Balancing Propensity Score (CBPS) method, which simultaneously optimizes covariate balance and estimates propensity scores as well as account for non-random selection of treatment households (electrified households). The analysis indicates the robust impact of rural electrification on economic and educational outcomes for the lowest-tier electricity consumers of rural Bangladesh. Electrification contributes to 81% (about 2.10 liter/month) reduction of kerosene consumption per household per month. Considering this reduction, we find that the connection of electricity under life-line program contributes to about 0.24 million tons' reduction in CO2 emission at the national level in each year. The average treatment effect of electrification on weekly working hours of household earning members is found to be positive and significant—weekly working hours increase by about 2.21 hours. With regard to educational outcomes, time spent on evening studies by boys and girls increases by about 21 minutes and 18 minutes per day, respectively, due to electrification. Overall, the paper provides valuable insights regarding the benefits of rural electrification in a setting with low electricity consumption and justifies the case for continued subsidized electrification program for the lowest-tier electricity consumers in Bangladesh.