Does Reliable Electricity Mean Lesser Agricultural Labor Wages? Evidence from Indian Villages

TL;DR

This study examines how improvements in electricity reliability in Indian villages negatively impact agricultural wage growth, especially for men, while potentially increasing women's labor supply through reduced fuel collection.

Contribution

It provides empirical evidence that better electricity reliability can suppress wage increases and highlights the role of electrical appliances in boosting labor demand.

Findings

Improved electricity reliability reduces casual agricultural wage growth.

Men's wages are more negatively affected than women's.

Electrical appliances like groundwater pumps increase labor demand.

Abstract

Using a panel of 1,171 villages in rural India that were surveyed in the India Human Development Surveys, I perform a difference-in-differences analysis to find that improvements in electricity reliability have a negative effect on the increase in casual agricultural labor wage rates. Changes in men's wage rates are found to be affected more adversely than women's, resulting in a smaller widening of the gender wage gap. I find that better electricity reliability reduces the time spent by women in fuel collection substantially which could potentially increase labor supply. The demand for labor remains unaffected by reliability, which could lead the surplus in labor supply to cause wage rates to stunt. However, I show that electrical appliances such as groundwater pumps considerably increase labor demand indicating that governments could target increasing the adoption of electric pumps along with bettering the quality of electricity to absorb the surplus labor into agriculture.