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The Impact of Rural Electrification on Business Enterprise Creation: Panel Data Evidence from Ethiopia

Author

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  • Hassan, Sied

    (World Bank, Washington, DC, and Environment and Climate Research Center, Ethiopian Development Research Institute, Addis Ababa)

  • Fentie, Amare

    (Environment and Climate Research Center)

Abstract

The creation of non-agricultural business enterprises is one of the multiple potential benefits of creating access to electricity in rural areas. This study investigates whether access to grid electricity helps rural households open business enterprises in Ethiopia. Using a differencein-difference approach, our results imply that access to grid electricity does not have significant impact in the short run; however, in the long run, it increased rural households’ opening of businesses by 5%. Off-grid electricity access through low-powered technologies such as solar lanterns has insignificant impacts in both the short and long run. Robustness and falsification tests are conducted to check the validity of our results. This has implications for the country’s Growth and Transformation Plan, which aspires to transform the country’s agriculture dominated economy into an industrial economy.

Suggested Citation

  • Hassan, Sied & Fentie, Amare, 2022. "The Impact of Rural Electrification on Business Enterprise Creation: Panel Data Evidence from Ethiopia," EfD Discussion Paper 22-4, Environment for Development, University of Gothenburg.
    • Handle: RePEc:hhs:gunefd:2022_004
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    References listed on IDEAS

    as
    1. Peters, Jörg & Vance, Colin & Harsdorff, Marek, 2011. "Grid Extension in Rural Benin: Micro-Manufacturers and the Electrification Trap," World Development, Elsevier, vol. 39(5), pages 773-783, May.
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    4. Lenz, Luciane & Munyehirwe, Anicet & Peters, Jörg & Sievert, Maximiliane, 2017. "Does Large-Scale Infrastructure Investment Alleviate Poverty? Impacts of Rwanda’s Electricity Access Roll-Out Program," World Development, Elsevier, vol. 89(C), pages 88-110.
    5. Gunther Bensch & Jochen Kluve & Jörg Peters, 2011. "Impacts of rural electrification in Rwanda," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 3(4), pages 567-588, December.
    6. Taryn Dinkelman, 2011. "The Effects of Rural Electrification on Employment: New Evidence from South Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3078-3108, December.
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    More about this item

    Keywords

    non-agricultural business; electrification; rural Ethiopia; panel data;
    All these keywords.

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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