Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households
American Economic Review
vol. 112,
no. 10, October 2022
(pp. 3291-3330)
Abstract
We study an energy efficient charcoal cookstove in an experiment with 1,000 households in Nairobi. We estimate a 39 percent reduction in charcoal spending, which matches engineering estimates, generating a 295 percent annual return. Despite fuel savings of $237 over the stove's two-year lifespan—and $295 in emissions reductions—households are only willing to pay $12. Drawing attention to energy savings does not increase demand. However, a loan more than doubles willingness to pay: credit constraints prevent adoption of privately optimal technologies. Energy efficient technologies could drive sustainable development by slowing greenhouse emissions while saving households money.Citation
Berkouwer, Susanna B., and Joshua T. Dean. 2022. "Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households." American Economic Review, 112 (10): 3291-3330. DOI: 10.1257/aer.20210766Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- O12 Microeconomic Analyses of Economic Development
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- O32 Management of Technological Innovation and R&D
- Q54 Climate; Natural Disasters and Their Management; Global Warming