Electrification and Cooking Fuel Choice in Rural India

This study investigates the causal link between electrification and the adoption of modern (andcleaner) cooking fuels, more specifically Liquefied Petroleum Gas (LPG). In order to correct forthe potential endogeneity in the placement of electrical infrastructure, we exploit an instrumentalvariable approach. Our instrument interacts state-level supply shifts in hydroelectric poweravailability with the initial level of electrification of each district. The results are consistent witha choice set expansion under a fixed budget constraint. We find that electrification leads to anincrease in the probability of adoption of (free) biomass fuels and a decrease in the probability ofadoption of (costly) modern cooking fuels. These results are statistically significant only for thepoorest households in our sample, while they become statistically insignificant when we move toricher households. The same is true for the share of expenditure in a specific fuel. These resultsseem to indicate that electrification, by creating an additional strain on households' finances,pushes them back on the energy ladder