Skip to main content

The impact of electrification on labour market outcomes in Nigeria

Economia Politica volume 37, pages 737–779 (2020)Cite this article

Abstract

This article aims at providing a better understanding of the effect of electricity access onto labour market outcomes in Nigeria, a country which hosts the second largest population without access to electricity in the world after India, but which has received so far very little attention from the academic community. We assess, through a rigorous econometric analysis carried out employing probit, biprobit and propensity score matching, this impact on the proportion of employed working age components of a household. We consider both female and male employment as well as agricultural and non-agricultural employment separately, further disaggregating the effect between rural and urban households. Our results show that, once the possible endogeneity in the relationships under investigation is tackled, electricity access has indeed a relevant impact on particular labour market outcomes. Specifically, we show a consistent shift out of agricultural employment of around 7% and into non-agricultural employment of about 15%., with some evidence of a positive effect on overall labour participation. These findings show that the expansion of electricity access to households which are not yet connected to the grid could play a relevant role in both increasing labour market participation and in helping the transformation of the Nigerian economy away from agricultural activities.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Fig. 1

Source: Nigerian General Household Survey 2015

Fig. 2

Source: Nigerian General Household Survey 2015

Fig. 3

Source: World Bank Enterprise Survey, Nigeria 2014.]

Fig. 4

Source: World Bank Enterprise Survey, Nigeria 2014

Fig. 5

Source: own elaboration, adapted from Salmon and Tanguy (2016)

Fig. 6

Source: Nigerian General Household Survey 2011–2015

Fig. 7

Source: Nigerian General Household Survey 2011–2015

Fig. 8

Source: Authors’ estimation using data from the Nigerian General Household Survey 2010/11, 2012/13 and 2015/16

Fig. 9

Source: Authors’ estimation using data from the Nigerian General Household Survey 2010/11, 2012/13 and 2015/16

Notes

  1. Refer inter alia to Alcott et al. (2014) for an estimation of how Indian textile plants respond to weekly electricity shortages and the level of the derived productivity losses; Alam (2014) for an investigation of the impact of power outages across industry types in India; Poczter (2016) for an instrumental variable approach based on district level solar irradiance to estimate change in electricity demand in Indonesia; Cole et al. (2018) for an analysis of the effect of black outs on firms’ productivity in Sub-Saharan Africa.

  2. World Bank Development Indicators database, accessed in May 2019.

  3. “Nigeria Vision 2020” is an economic plan prepared by the Nigerian National Planning Commission in 2009 to articulate the Federal Government development strategy for the period 2009–2020.

  4. The shares of male and female employed in agricultural and non-agricultural activities do not sum up to the shares of total male and female employed as each household member can be employed in more than one activity.

  5. It must be noted that we consider households that received less than an hour of electricity from the grid over the previous week as having no access to electricity.

  6. We also consider an alternative definition of having received at least one hour of electricity per day as a robustness check.

  7. Regression results not reported but available upon request.

  8. Full regression results available upon request.

  9. Full regression results available upon request.

  10. As the timing of grid expansion is also likely to have been different between urban and rural areas, we also tried including lagged access to electricity in both urban rural split samples to see if this significantly impacts the results, which remain largely consistent. Results are available upon request.

  11. The discrepancy between the magnitude of female overall employment and those where the type of employment is divided arises from the fact that while the first is obtained via biprobit estimation, the latter are both obtained via probit estimation. While we find some evidence of endogeneity in the relationship between non-agricultural labour allocation and access to electricity for female headed household, none of our usual instrument is significant, so we prefer the marginal effect obtained through the probit estimation. However, the latter might suffer from under-estimation.

  12. For ease of exposition we do not report the ATT when Kernel matching is employed instead. These results, as well as all tables for the calculation of the new propensity scores and for covariate imbalance testing are available upon request.

References

  • Abadie, A., & Imbens, G. (2006). Large sample properties of matching estimators for average treatment effects. Econometrica, 74(1), 235–267.

    Article  Google Scholar 

  • Abeberese, A.B. (2012) Electricity Cost and Firm Performance: Evidence from India, Columbia University Working Paper

  • Adenikinju, A. F. (2003). Electric infrastructure failures in Nigeria: a survey-based analysis of the costs and adjustment responses. Energy Policy, 31(14), 1519–1530.

    Article  Google Scholar 

  • Akpandjar, G., & Kitchens, C. (2017). From darkness to light: the effect of electrification in ghana, 2000–2010. Economic Development and Cultural Change, 66(1), 31–54.

    Article  Google Scholar 

  • Alam, M.M. (2014) Coping with Blackouts: Power Outages and Firm Choices (Order No. 3580619). Available from ProQuest Dissertations & Theses Global. (1539578867).

  • Alby, P., Dethier, J., & Straub, S. (2012). Firms operating under electricity constraints in developing countries. The World Bank Economic Review, 27(1), 109–132.

    Article  Google Scholar 

  • Allcott, H., Collard-Wexler, A., & O’Connell, S. (2016). How do electricity shortages affect productivity? Evidence from India. American Economic Review, 106(3), 587–624.

    Article  Google Scholar 

  • Attigah, B. and Mayer-Tasch, L. (2013) The Impact of Electricity Access on Economic Development— A Literature Review. In: Mayer-Tasch, L. and Mukherjee, M. and Reiche, K. (eds.), Productive Use of Energy (PRODUSE): Measuring Impacts of Electrification on Micro-Enterprises in Sub-Saharan Africa. Eschborn.

  • Babalola, S., & Lawrence Kincaid, D. (2009). New Methods for estimating the impact of health communication programs. Communication Methods and Measures, 3(1–2), 61–83.

    Article  Google Scholar 

  • Barron, M. and Torero, M. (2015) Household Electrification and Indoor Air Pollution, MPRA Paper 61424

  • Bensch, G., Kluve, J., & Peters, J. (2011). Impacts of rural electrification in Rwanda. Journal of Development Effectiveness, 3, 567–588.

    Article  Google Scholar 

  • Bernard, T. (2010). Impact analysis of rural electrification projects in Sub-Saharan Africa. The World Bank Research Observer, 27(1), 33–51.

    Article  Google Scholar 

  • Bernard, T., & Torero, M. (2015). Social interaction effects and connection to electricity: experimental evidence from Rural Ethiopia. Economic Development and Cultural Change, 63(3), 459–484.

    Article  Google Scholar 

  • Bernard, T., & Torero, M. (2013) bandwagon effects in poor communities experimental evidence from a rural electrification program in Ethiopia, mimeo

  • Blalock, G., & Veloso, F. M. (2007) Imports, productivity growth, and supply chain learning, SSRN Scholarly Paper No. ID 961509, Rochester, NY: Social Science Research Network

  • Bonan, J., Pareglio, S., & Tavoni, M. (2017). Access to modern energy: a review of barriers, drivers and impacts. Environment and Development Economics, 22(5), 491–516.

    Article  Google Scholar 

  • Burland, A. (2014). Power outages, power externalities, and baby booms. Demography, 51, 147–1500.

    Google Scholar 

  • Burlig, F and Preonas, L (2016) Out of the darkness and into the light? Development effects of rural electrification Energy Institute At Haas, WP 268

  • Cecelski, E., & Glatt, S. (1982). The role of rural electrification in development, Energy in developing countries series, discussion paper D-73E. Washington: Resources for the Future.

    Google Scholar 

  • Chakravorty, U., Pelli, M., & Ural Marchand, B. (2014). Does the quality of electricity matter? Evidence from Rural India. Journal of Economic Behavior and Organization, 107, 228–247.

    Article  Google Scholar 

  • Chauvet, L., Torres, A. D. M., & Tiemann, A. (2018) Electricity and manufacturing firm profits in Myanmar. In: Working Papers No. P214, FERDI

  • Cole, M. A., Elliott, R. J. R., Occhiali, G., & Strobl, E. (2018). Power outages and firm performance in Sub-Saharan Africa. Journal of Development Economics, 134, 150–159.

    Article  Google Scholar 

  • Cook, P. (2011). Infrastructure, rural electrification and development. Energy for Sustainable Development, 15, 304–313.

    Article  Google Scholar 

  • Dasso, R., & Fernandez, F. (2015). The effects of electrification on employment in rural Peru. IZA Journal of Labor & Development, 4(1), 6.

    Article  Google Scholar 

  • Davis, M. (1998). Rural household energy consumption: the effects of access to electricity—evidence from South Africa. Energy Policy, 26(3), 207–217.

    Article  Google Scholar 

  • Dinkelman, T. (2011). The effects of rural electrification on employment: new evidence from South Africa. American Economic Review, 101(7), 3078–3108.

    Article  Google Scholar 

  • Duflo, E., & Pande, R. (2007). Dams. The Quarterly Journal of Economics, 122, 601–646.

    Article  Google Scholar 

  • Elias, R.J. and Victor, D.G. (2005) Energy transitions in developing countries: a review of concepts and literature. In: Stanford Working Papers 40 ;

  • Emodi, N. V., & Yusuf, S. D. (2015). Improving electricity access in Nigeria: obstacles and the way forward. International Journal of Energy Economics and Policy, 5(1), 335–351.

    Google Scholar 

  • Fetzer, T., Pardo, O. and Shanghavi, A. (2013) An Urban Legend?! Power Rationing, Fertility and its Effect on Mothers. CEP Discussion Paper 1427

  • Fisher-Vanden, K., Mansur, E., & Wang, Q. J. (2015). Electricity shortages and firm productivity: evidence from China’s industrial firms. Journal of Development Economics, 114, 172–188.

    Article  Google Scholar 

  • Fluitman, F. (1983) Economic impact of rural electrification in developing countries: a review of evidence world employment programe. International Labour Office, Working paper 126

  • Grogan, L. (2008). Community electrification and labour market development, Working Paper, Department of Economics, University of Guelph, Ontario, Canada

  • Grogan, L. (2016). Household electrification, fertility, and employment: evidence from hydroelectric dam construction in Colombia. Journal of Human Capital, 10(1), 109–158.

    Article  Google Scholar 

  • Grogan, L., & Sadanand, A. (2013). Rural electrification and employment in poor countries: evidence from Nicaragua. World Development, 43, 252–265.

    Article  Google Scholar 

  • Guilkey, D.K. and Lance, P.M. (2014) Program impact estimation with binary outcome variables: monte carlo results for alternative estimators and empirical examples, in Festschrift in Honor of Peter Schmidt: Econometric Methods and Application, Sickles, R.C. and Horrace, W.C. (eds.)

  • Heckman, J. J. (1978). Dummy endogenous variables in a simultaneous equation system. Econometrica, 46(4), 931–959.

    Article  Google Scholar 

  • Hutchinson, P., & Wheeler, J. (2006). Advanced methods for evaluating the impact of family planning communication programs: evidence from Tanzania and Nepal. Studies in Family Planning, 37(3), 169–186.

    Article  Google Scholar 

  • International Energy Agency, IRENA, UNSD, WB, WHO. (2019) 2019 Tracking SDG 7: the energy progress report 2019, Washington

  • Interntational Energy Agency. (2018). World Energy Outlook 2018. Paris: OECD/IEA.

    Book  Google Scholar 

  • Jiminez, R. (2017) Development effects of rural electrification, Policy Brief N0 IDB-PB-261, Infrastructure and Energy Sector: Energy Division

  • Khandker, S. R., Barnes, D. F., & Samad, H. A. (2013). Welfare impacts of rural electrification: a panel data analysis from Vietnam. Economic Development and Cultural Change, 61, 659–662.

    Article  Google Scholar 

  • Khandker,S.R., Samad, H.A., Ali, R. and Barnes, D.F. (2012) Who Benefits Most from Rural Electrification? Evidence in India, World Bank Policy Research Working Paper 6095

  • Lee, K., Miguel, E., & Wofram, C. (2020). Does household electrification supercharge economic development. Journal of Economic Perspectives, 34(1), 122–144.

    Article  Google Scholar 

  • Lipscomb, M., Mobarak, A. M., & Bharam, T. (2013). Development effects of electrification: evidence from the topographic placement of hydropower plants in Brazil. American Economic Journal, 5, 200–231.

    Google Scholar 

  • Long, J. S., & Freese, J. (2006). Regression models for categorical dependent variables using Stata, Stata press

  • Morris, S. (2007). The impact of obesity on employment. Labour Economics, 14, 413–433.

    Article  Google Scholar 

  • Nichols, A. (2011) Causal inference for binary regression with observational data, retrieved 8/9/2017 https://fmwww.bc.edu/repec/chic2011/chi11_nichols.pdf

  • Ogunleye, E.K. (2016) Political economy of Nigerian power sector reform, WIDER Working Paper 2016/9

  • Olatomiwa, L., Mekhilef, S., Huda, A. S. N., & Ohunakin, O. S. (2015). Economic evaluation of hybrid energy systems for rural electrification in six geo-political zones of Nigeria. Renewable Energy, 83, 435–446.

    Article  Google Scholar 

  • Ozturk, I. (2010). A literature survey on energy-growth nexus. Energy Policy, 38, 340–349.

    Article  Google Scholar 

  • Peters, J., & Sievert, M. (2016). Impacts of rural electrification revisited—the African context. Journal of Development Effectiveness, 8(3), 327–345.

    Article  Google Scholar 

  • Peters, J., Vance, C., & Harsdorff, M. (2011). Grid extension in rural Benin: Micro-manufacturers and the electrification trap. World Development, 39(5), 773–783.

    Article  Google Scholar 

  • Poczter, S. (2016) You can’t count on me: the impact of electricity unreliability on productivity, SSRN Scholarly Paper No. ID 2830197, Rochester, NY: Social Science Research Network

  • Roller, L.-H., & Waverman, L. (2001). Telecommunications infrastructure and economic development: a simultaneous approach. American Economic Review, 91, 909–923.

    Article  Google Scholar 

  • Rosenberg, N. (1998). The role of electricity in industrial development. The Eneergy Journal, 19, 7–24.

    Google Scholar 

  • Rubin, D. B. (2001). Using propensity scores to help design observational studies: application to the tobacco litigation. Health Services & Outcomes Research Methodology, 2, 169–188.

    Article  Google Scholar 

  • Rud, J. P. (2012). Electricity provision and industrial development: Evidence from India. Journal of Development Economics, 97, 352–367.

    Article  Google Scholar 

  • Rutstein, S. (2008) The DHS Wealth Index: Approaches for Rural and Urban Areas, retrieved 8/10/2017 https://dhsprogram.com/publications/publication-wp60-working-papers.cfm

  • Salmon, C., & Tanguy, J. (2016). Rural electrification and household labor supply: evidence from Nigeria. World Development, 82, 46–68.

    Article  Google Scholar 

  • Usman, Z. G., & Abbasoglu, S. (2014). An overview of power sector laws, policies and reforms In Nigeria. Asian Transactions on Engineering, 4(2), 6–12.

    Google Scholar 

  • van de Walle, D., Ravallion, M., Mendiratta, V., & Koolwal, G. (2017). Long-term gains from electrification in rural India. The World Bank Economic Review, 31(2), 385–411.

    Google Scholar 

  • Williams, R. (2012). Using the margins command to estimate and interpret adjusted predictions and marginal effects. Stata Journal, 12(2), 308.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Bruegel, Rue de la Charité 33, 1210, Brussels, Belgium

    Simone Tagliapietra

  2. Università Cattolica del Sacro Cuore, Milan, Italy

    Simone Tagliapietra

  3. The Johns Hopkins University SAIS Europe, Bologna, Italy

    Simone Tagliapietra

  4. Fondazione Eni Enrico Mattei, Milan, Italy

    Simone Tagliapietra

  5. Institute of Development Studies, University of Sussex, Brighton, UK

    Giovanni Occhiali

  6. The Graduate Institute, Geneva, Switzerland

    Enrico Nano

  7. AIT Austrian Institute of Technology, Vienna, Austria

    Robert Kalcik

Authors
  1. Simone Tagliapietra
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Giovanni Occhiali
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Enrico Nano
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Robert Kalcik
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Simone Tagliapietra.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Tagliapietra, S., Occhiali, G., Nano, E. et al. The impact of electrification on labour market outcomes in Nigeria. Econ Polit 37, 737–779 (2020). https://doi.org/10.1007/s40888-020-00189-2

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40888-020-00189-2

Keywords

  • Nigeria
  • Energy access
  • Electrification
  • Labour market
  • Development