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The Welfare Impacts of Rural Electrification in Bangladesh

Lack of access to electricity has been considered a major impediment to the growth and development of rural economies. Thus, the provision of electricity and other forms of modern energy has been a priority for many development organizations, including the World Bank. However, few impact studies of electrification have taken the endogeneity of the grid connection into account. Using a cross-sectional survey conducted in 2005 of 20,900 rural households in Bangladesh, this paper examines the welfare impacts of household access to grid electricity after controlling for endogeneity bias. The econometric analysis shows that grid electrification has significant positive impacts on household income, expenditure, and education. The household gain in total income due to electrification is as high as 21 percent, with a 1.5 percentage point reduction in poverty per year. The results also suggest that the income and expenditure effects of electricity connection are higher for better-off households. Keywords: Rural electrification, Electrification impacts, Distributional impacts, Bangladesh

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Energy Specializations: Energy Access – Energy Poverty and Equity; Electricity – Local Distribution; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
D44 - Auctions
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Rural electrification; Electrification impacts; Distributional impacts; Bangladesh

DOI: 10.5547/ISSN0195-6574-EJ-Vol33-No1-7

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Published in Volume 33, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.