Experimental Evidence on the Economics of Rural Electrification

We present results from an experiment that randomized the expansion of electric grid infrastructure in rural Kenya. Electricity distribution is the canonical example of a natural monopoly. Randomized price offers show that demand for electricity connections falls sharply with price. Experimental variation in the number of connections, combined with administrative cost data, reveals considerable scale economies, as hypothesized. However, consumer surplus is far less than total construction costs at all price levels.

• IPC
• EDS