The Persistence of Energy Poverty: A Dynamic Probit Analysis 20-16

EfD Discussion Paper
1 June 2020

Yonas Alem, Eyoual Demeke

This paper contributes to the growing literature on energy poverty in developing countries. We use a dynamic probit estimator on three rounds of panel data from urban Ethiopia to estimate a model of the probability of being energy poor and to investigate the persistence
of energy poverty. We also study the impact of energy price in ation, which Ethiopia experienced during 2007{2009, on energy use and energy poverty. We nd strong evidence of state dependence in energy poverty. A household that is energy poor in one round is up to 16% more likely to be energy poor in the subsequent round. Dynamic probit regression results also suggest that an increase in the price of kerosene { the most important fuel for the urban poor
{ drives households into energy poverty. A fractional response estimator for panel data, which estimates the impact of energy prices on the proportion of energy obtained from clean sources, also supports the nding on the adverse impact of energy price in ation. Households responded to the signicant rise in the price of kerosene by consuming a large amount of charcoal, which has been documented to have serious environmental, climate, and health consequences. Our results have signicant implications for policies formulated to reduce energy poverty, conserve biomass resources, and promote energy transition in developing countries.

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Publication | 10 June 2020