Does remittance inflow influence energy poverty?

Energy poverty is a relevant issue in Africa, driven largely by income constraints. Eliminating or reducing this phenomenon could prove very vital in achieving the United Nations’ Sustainable Development Goal 7 as well as sustainable development and inclusive growth. Remittances remain an important means of income support in developing and emerging economies. Even though remittance inflows to Africa have been rising significantly and are three-times higher than the official development assistance (ODA) inflows, it is still unclear how this income support system is impacting energy consumption and access to energy. This study investigates the short-run and long-run effects of remittances on energy poverty in both the strong form (multidimensional energy poverty) and the weak form (energy access and energy consumption). The study relies on an unbalanced annual panel dataset for 51 African countries from 1991 to 2017. The results of applying the dynamic common correlated effect pooled mean group instrumental variable (DCCE-PMG IV) estimator reveal that, for the weak form definition of energy poverty, remittances promote energy access and energy consumption mainly through the complementary channels of investment and consumption. The estimated mean marginal effects show that a one percent increase in remittance inflows will result in about 0.5 to 0.8 percent increase in electricity consumption when both complementary channels are considered. However, for the strong form definition of energy poverty, remittances reduce energy poverty, but little evidence is found on the complementary role of both investment and consumption activities. Thus, policies to reduce the cost of sending remittances and to target remittance-recipients' energy needs should be implemented to reduce energy poverty. Other policy implications are discussed.