Electricity Accessibility and Household Business Start-ups in Rural Uganda: Evidence from Quasi-Experimental Analysis

Abstract

This article examines the impact of access to electricity on rural household business startups across 3 channels: (1) access to rural electrification programmes, (2) access to power (irrespective of the source) and (3) connection to the grid. We use inverse probability weighted regression adjustment on survey data collected from the central region of rural Uganda and apply propensity score matching (PSM) as a check to the robustness of our results. Our primary results reveal substantial and significant impacts of electricity access on household business start-ups across the three channels. Our findings remain robust, and hidden bias does not affect our results. We find that access to power seems to have a more significant impact than access to the other two channels. This suggests that for a better understanding of how electricity affects rural areas, a comprehensive analysis of all power sources is crucial. Additionally, we show that access to electricity primarily influences the establishment of service-related enterprises rather than manufacturing and processing enterprises. From a policy standpoint, our results indicate that developing a rural transformation program through enhanced electrification interventions necessitates multiple support programmes beyond merely extending the grid lines to rural areas.