Does electricity reliability matter? Evidence from rural Viet Nam

Abstract

Using a three-round panel dataset of more than 3,000 households, the paper estimates the impacts of electricity reliability improvement on the welfare and economic decisions of rural Vietnamese households. The number of days without power outages in communes per annum is used to proxy for electricity reliability. We employ a fixed effect regression with an instrumental variable to deal with the endogeneity issue, led by the simultaneous causal relationship between the reliability of electricity and household outcomes along with the unobservable variables. We use the similar electricity quality variable but measured in other communes within the same province as an instrumental variable. Results from this model show that an improvement in electricity reliability plays an important role in enhancing incomes, durable consumption, access to credit and land investment decisions of rural households.