Does Quality of Electricity Matter? Household-Level Evidence From the Philippines

• Main Authors: Pepino, Vanessa Mae, Ravago, Majah-Leah V, Jandoc, Karl
• Format: text
• Published: Archīum Ateneo 2020
• Subjects: Electricity quality; reliability; two-stage probit-ordered probit; Philippines; Economics; Income Distribution; Power and Energy
• Online Access: https://archium.ateneo.edu/economics-faculty-pubs/170; https://www.tandfonline.com/doi/abs/10.1080/13547860.2020.1840492
• Institution: Ateneo De Manila University

The Philippines is a country that faces many development challenges, including providing reliable and good quality electricity. Access to good quality electricity connection matters because it affects many aspects that increase productivity (e.g. education, health and business) and can make lives easier and more comfortable. While access has improved over time, many households still suffer from poor quality of their connection brought about by incidents of power outages, fluctuations and low voltage. This article attempts to examine whether better electricity quality improves household welfare. We apply a two-stage probit-ordered probit model to overcome endogeneity caused by reverse causation between electricity quality and household income. We find that households experiencing better electricity quality decrease the probability of remaining in the lowest income category by 23%.