Cash transfers and residential demand for electricity: insights from BISP, Pakistan
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RESEARCH ARTICLE
Cash transfers and residential demand for electricity: insights from BISP, Pakistan Nasir Iqbal 1
&
Saima Nawaz 2
Received: 28 April 2020 / Accepted: 22 October 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract We examine the causal impacts of the cash transfer program, namely the Benazir Income Support Program (BISP), on residential demand for electricity among ultra-poor in Pakistan. We also analyze the effects of BISP cash transfers on a household’s decision to acquire electrical appliances. The empirical analysis is based on the fuzzy regression discontinuity design (RDD) using primary data collected from 1200 households. We find that BISP cash transfer has a significant positive impact on electricity demand among the target group. The cash transfer positively affects the use of few essential electric appliances, such as a washing machine and refrigerator, but not all electrical appliances. The electricity demand mainly stems from the additional use of existing electrical devices. Therefore, the extra income from BISP may not allow the recipients to move up the electric appliances ladder. The provincial analysis shows that the impact of BISP cash transfers on electricity demand varies across provinces and the development level, signifying the importance of regional heterogeneities, such as electricity supply. The findings suggest that cash transfers may facilitate the transition from traditional to modern energy to overcome the rising pollution problem and protect health. The expansion in the cash transfer program demands continuous investment in the power sector to fulfill the growing need for electricity. Keywords Cash transfers . Electricity demand . Ultra-poor . Quasi-experimental . BISP
Introduction We examine the impact of unconditional cash transfer program (CTP) associated with Pakistan’s Benazir Income Support Program (BISP) on residential demand for electricity and a household’s decision to acquire electrical appliances. The provision of electricity is essential to promote employment and economic growth, alleviate poverty, and support soft infrastructure that leads to sustainable development (Nawaz et al. 2014; Panos et al. 2016; Herington et al. 2017; Khan et al. 2018; Samad and Zhang 2018). Despite significant electrification progress, more than 840 million people live without electricity, mainly in Africa and Asia (IEA 2019). More than 4 billion people have low penetration of electrical appliances such as Responsible Editor: Philippe Garrigues * Nasir Iqbal [email protected] 1
Pakistan Institute of Development Economics (PIDE), Islamabad, Pakistan
2
COMSATS University Islamabad, Islamabad, Pakistan
washing machines and refrigerators despite having access to electricity (Gertler et al. 2016). The official estimates depict that more than 40 million people do not have access to electricity in Pakistan, and of these, around 36% are poor people (IEA 2020). Lack of access and weak electricity demand negatively affect the household’s standard of living a
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