Does access to electricity promote business creation over the short term and long term? Does the effect differ with grid and off-grid electricity access? We provide insights from the Electricity Access and Business Creation project in Ethiopia, based on the World Bank’s Socio-Economic Survey data.
Most of the businesses in rural areas are home-based, i.e., the household runs businesses such as food sales, restaurants, mobile, and electronics shops, barbering, etc., within their residence. Rural households’ business ownership increased from 17.5% in 2011 to 28.5% in 2016. We found that:
- Connection to grid electricity increased rural households’ operation of businesses by 5% over a long-term time period, but no effect is observed in the short term;
- Off-grid electricity does not have a measurable impact in either the short or the long run;
If the government wants to speed up the transformation of the rural economy, the rapid expansion of grid electricity is one of the key elements of infrastructure that should receive investment in the rural areas.