Association for Public Policy Analysis & Management

In an effort to promote economic growth and reduce poverty, the Millennium Challenge Corporation (MCC), a U.S. government foreign aid agency, funded an energy sector project in Tanzania from 2008 to 2013. MCC invested over $200 million in this project, one component of which was an initiative that provided low-cost electricity connections to a random subset of communities. In this paper we present estimated impacts of this initiative on household outcomes.

This initiative was designed to address the concern that normal fees for connecting to the electric grid present an important barrier to electricity access for the majority of Tanzanians who had an average annual per capita income of just under $700 at the time the initiative was undertaken. In the absence of this initiative connection fees in Tanzania were about $200 in urban areas and $110 in rural areas. The initiative lowered the fees by over 80 percent. Mathematica—MCC’s independent evaluator for the energy project—randomly assigned 27 communities to a treatment group that received the low-cost connection offer and 151 communities to a control group that did not receive the offer. About 5,800 low-cost connections were made available to customers in the treatment group on a first-come, first-served basis. A communications campaign was implemented to inform households of the offer and of the benefits of connecting. Community members were given between 60 to 90 days to respond. The initiative was implemented between February 2013 to June 2014 and about 31 percent of the available connections were used.

In this paper we use data from a follow-up household survey administered between September 2015 and January 2016—more than a year after the initiative was completed. We estimate the initiative’s impacts on household outcomes in the following domains: connection rates; energy use; educational and child time use; pollution, health and safety; business activity and adult time use; economic wellbeing; and household mobility and composition. The impact analysis also uses data from a baseline household survey conducted in 2011, prior to the random assignment of the communities.

The paper provides rigorous evidence on the impacts of offering low-cost connections to the electric grid on households in Tanzania, and adds to the very limited rigorous evidence available in the literature. Such initiatives might be particularly helpful for low-income populations in many developing countries, and might contribute to reducing inequalities in access to electricity. With the 2013 announcement of the Power Africa initiative by the U.S. government, under which the U.S. and African governments, multilateral and bilateral development partners, and private businesses are expected to invest about $32 billion in energy sector projects in a number of African countries, our findings provide critical information for policy discussions.