The Effects of Rural Electrification on Employment: New Evidence from South Africa¶

Literature › Works

Taryn Dinkelman (2010). The Effects of Rural Electrification on Employment: New Evidence from South Africa. American Economic Review (published Dec 2011, 101(7)); this is the Aug 2010 version with web appendices.


Type	journal article
Scope	Post-1994 South African economy
Method	econometric
Period studied	1990–2007
Regions	KwaZulu-Natal, former KwaZulu homeland (rural)
Themes	transition post apartheid, labour markets wages, bantustans removals influx, demography urbanisation, inequality poverty unemployment, methods data sources
Citation key	`dinkelman2010`

Argument¶

Dinkelman estimates the causal effect of South Africa's post-1994 mass household electrification on rural employment in ex-homeland KwaZulu-Natal. She uses two strategies: an IV approach in which land gradient instruments for Eskom project placement in a 1996-2001 Census community panel, and a magisterial-district fixed-effects/trends approach on household surveys. Female employment rises significantly within five years, while female wages fall and male earnings rise. She argues the main channel is a labour-supply shock that frees women's time from home production, possibly together with new home-based micro-enterprises. Spillover tests rule out a rural industrialisation explanation, and migration cannot fully account for the result.

Evidence and method¶

Census 1996 and 2001 100% community aggregates for 1,816 rural ex-homeland KZN communities; 10% Census micro data; Eskom project data on connections 1990-2007 and 1996 grid and substation locations; SRTM 90m elevation data for gradient; October Household Surveys 1995/1997/1999 and September LFS 2001 (38 magisterial districts); Schools Register of Needs; 2000 municipal election results; LFS 2002 migration module; Eskom annual reports and interviews/personal communications with Eskom engineers.

Findings¶

IV estimates show a large rise in female employment after an Eskom project. (p. 17)

female employment increases by 9 to 9.5 percentage points, or between 30 and 35 percent from baseline, in the wake of an electricity project.
The scale of the electrification roll-out and the apartheid-era backlog it addressed. (p. 2)

2 million households, or almost one quarter of all households across the country, were newly connected to the grid by 2001.
Gradient lowers the probability of project placement, supporting it as an instrument. (p. 16)

for a two standard deviation increase in gradient (about 10 degrees), the probability of receiving an Eskom project falls by about 8 percentage points.
The implied aggregate effect is modest relative to national job creation. (p. 18)

this translates into an increase of approximately 15,000 newly employed women out of the baseline female population of 165,637. This is 0.75 percent
Households shift sharply from wood to electricity in electrified communities. (p. 22)

use of electric lighting increases by a substantial and signiﬁcant 65 percentage points, wood use falls by 27 percentage points and cooking with electricity rises by 23 percentage points.
Fixed-effects evidence shows female wages fall and male earnings rise, pointing to a labour-supply response. (p. 21)

women’s wages fall by about 20 percent (1.38*0.15), while for men, the coeﬃcient on electriﬁcation rate is positive but not signiﬁcant.
No spatial spillovers, so electrification did not spark rural industrialisation. (p. 23)

it is implausible that household electriﬁcation created jobs by sparking the industrialization of rural KZN.
The placebo test on areas electrified before 1996 supports the gradient instrument's validity. (p. 18)

The coeﬃcient on gradient is small (-0.001) and insigniﬁcant, yet signiﬁcantly diﬀerent from the 0.007 reduced form coeﬃcient on gradient in Table 4
Migration responses are present but cannot explain all of the employment effect. (p. 24)

Panel B, columns (3) through (6) demonstrate that electriﬁcation eﬀects are still present and, if anything, are larger for incumbent women, and not signiﬁcant for men.
Apartheid left African households, especially in homelands, without electricity; two-thirds still lacked it in 1994. (p. 7)

At the time of the ﬁrst democratic elections in 1994, over two-thirds of African households did not have access to electricity.