Intensive Margin of Electrification: Evidence from Rural India

Mardi | 2013-03-26

Ujjayant CHAKRAVORTY – Beyza Ural MARCHAND – Martino PELLI

This paper studies the effects of increased access to electricity in rural India on household income. We examine the effect of electrification at the intensive margin as well as from connecting to the grid – the extensive margin. The analysis is based on two rounds of a representative panel of more than 10,000 households. We use the district-level variation in land elevation and the district-level density of transmission cables as instruments for the electrification status of the household. The results suggest that the quality of electricity (measured in terms of daily hours of supply) may be as important as connecting to the grid. A grid connection increases average household income by about 8-10 percent, but a high quality connection by about 13-15 percent. Moreover, at the intensive margin, marginal returns from average daily hours of supply are highest at very low and very high levels of supply, not over a wide range in-between.