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The impact of electrification on labour market outcomes in Nigeria

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.

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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.

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Correspondence to Simone Tagliapietra.

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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

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Keywords

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