Energy and Digital Infrastructure Complementarities

This paper studies the complementarities between energy and digital infrastructure in developing countries. Using geospatial data on power transmission lines, power plants, cell towers, and fiber-optic nodes matched to settlement-level wealth indicators across sub-Saharan Africa, and detailed subnational data from Liberia, we estimate the joint effects of proximity to energy and digital infrastructure on local economic development. We test whether the marginal returns to one infrastructure type are increasing in the availability of the other. Our results confirm significant positive complementarity effects. Across sub-Saharan Africa, both digital and power infrastructure proximity are strongly associated with higher settlement wealth, with stable positive interaction coefficients (semi-elasticities) of approximately 1.5 International Wealth Index points across all control specifications, indicating that marginal returns to each infrastructure type are substantially amplified by the presence of the other. These findings are robust across linear fixed-effects regressions and nonparametric Local-Linear Causal Forest (LLCF) estimates; the LLCF further reveals that proximity to the complementary infrastructure type is the single strongest predictor of treatment effect heterogeneity, a direct nonparametric signature of complementarity. The quality of digital connectivity as measured by internet speed is an important mediator. In Liberia, energy consumption per connection also interacts positively with cell tower proximity, confirming complementarity at the intensive margin of energy usage. Our findings support coordinated, spatially bundled investment in both infrastructure types as a development policy priority.

Kiel Institute Expert