Electrification, Productivity Use of Energy, and the Informal Sector of the Global South

This study investigates how electricity use, reliability, and cost affect the productivity of firms in the informal sector in the Global South, especially in Sub-Saharan Africa, South Asia, and Latin America. Using a dataset of over 41,371 firms across 16 countries, we employ quantile regression to demonstrate how these factors influence productivity. The results show that simply having access to electricity is not enough to achieve productivity gains; reliability and quality of supply are crucial. Outages significantly lower productivity, particularly for firms in the lower quantiles, while electricity costs have varying effects based on firm size and regional context. In South Asia, off-grid and subsidized solutions tend to have more positive impacts, whereas in Sub-Saharan Africa, weak governance and infrastructure gaps hinder their effectiveness. Latin America displays intermediate results, with increased access but ongoing cost challenges. These findings suggest that energy policies should extend beyond expanding access to prioritize reliability, smart subsidies, and complementary institutional reforms. Addressing these issues can help governments enhance the role of electricity in fostering the growth, resilience, and structural transformation of informal enterprises in low- and middle-income countries.