Installing rural electricity
Installing rural electricity. Photo: EfD

The impact of rural electrification on business enterprise creation: Panel data evidence from Ethiopia

EfD Discussion Paper
1 March 2022

Access to grid electricity helps rural households start non-agricultural businesses.

Sied Hassen, Amare Fentie


The creation of non-agricultural business enterprises is one of the multiple potential benefits of creating access to electricity in rural areas. This study investigates whether access to grid electricity helps rural households open business enterprises in Ethiopia. Using a difference-in-difference approach, our results imply that access to grid electricity does not have a significant impact in the short run; however, in the long run, it increased rural households’ opening of businesses by 5%. Off-grid electricity access through low-powered technologies such as solar lanterns has insignificant impacts in both the short and long run. Robustness and falsification tests are conducted to check the validity of our results. This has implications for the country’s Growth and Transformation Plan, which aspires to transform the country’s agriculture-dominated economy into an industrial economy.

Key Words: non-agricultural business; electrification; rural Ethiopia; panel data

JEL Codes: D00, D22, Q40


Files and links

Sustainable Development Goals
Publication reference
MS 840 DP 22-04
Publication | 23 March 2022