Electricity contracts requiring frequent, large, or timely purchases pose particular challenges for consumers facing liquidity constraints and transaction costs. Such frictions are common in rural, low-income communities, but their impact on electricity demand on the intensive margin remains unknown. I study how consumers navigate these frictions using prepaid access time for solar electricity in rural Rwanda. I randomly offer 2,000 solar customers a line of credit for access time, which alleviates liquidity constraints and lowers transaction costs. Consumers who previously bought in bulk eliminate wasteful consumption, reducing demand by up to 6.4%. Liquidity constrained consumers increase demand by 88%. My results illustrate that liquidity constraints limit demand for solar and transaction costs distort demand in opposite directions for different consumers. Reducing both frictions yields higher estimates of welfare from electricity than previous results in the literature. However, marginal households’ willingness to pay still falls below cost-covering levels.
Electricity is widely considered to be critical for economic growth, but recent literature provides mixed evidence on the welfare implications of electrification in developing countries. I employ a unique product to address current limitations in the literature: pay as you go (PAYGo) solar. I partner with a PAYGo solar company to study consumer responses to randomly offered bulk discounts and monthly rewards in Rwanda and Kenya. Both types of incentives potentially alter the average and marginal price that consumers pay for solar. I find that most consumers do not respond to either type of incentive. While this could suggest that demand for electricity is inelastic on the intensive margin, I provide suggestive evidence that uncertainty over the future marginal utility of solar as well as liquidity constraints may also play important roles in explaining consumer non-responsiveness.
How much do electrification choices depend on the expected price of electricity on the intensive margin? I use the phased rollout of a subsidy for pay as you go (PAYGo) solar electricity in Togo to measure impacts on electrification. The subsidy reduces the intensive margin price of electricity by 18-42%, with the largest discounts going to consumers choosing the smallest systems. The subsidy increases the adoption of small systems by 85%-135% under different specifications, implying relatively high elasticities of 2.02-3.25. Increases in adoption of medium and large systems range from 23% to 63%, implying elasticities between 1.33 and 3.54. I compare welfare estimates from the subsidy in Togo to work I have done on the intensive margin of PAYGo in Rwanda. Discrepancies between the two studies point to limitations of revealed preference measures for durable goods: both intensive and extensive margin demand may be shaped by a variety of non-price factors that fail to accurately measure welfare.
With Ethan Ligon
Household consumption expenditures are generally the preferred measure of household welfare in low income countries, but surveying households about expenditures is costly. Can short message service (SMS) surveys enable researchers and policymakers to measure household welfare at a high frequency in low income countries? We detail the implementation of a SMS survey on household composition and consumption expenditures in Rwanda and evaluate the efficacy of such surveys for gathering high-frequency data. We successfully calculate a measure of household welfare for households that respond to the SMS survey, and we find that SMS surveys are substantially less costly than equivalent in-person surveys; however, nonresponse is a significant problem. For this reason, our proposed use of high-frequency SMS surveys is to combine them with in-person baseline surveys and leverage the panel nature of the data to compute weights that correct for nonresponse bias.
With Wenfeng Qiu
Measures like pre-analysis plans ask researchers to describe planned data collection and justify data exclusions, but they provide little enforceable oversight of primary data collection. We show that a simple algorithm can select large subsets of data that yield economically meaningful and statistically significant treatment effects. The subsets cannot be distinguished from a random sample of the original data, rendering the selection undetectable if peer reviewers are unaware of the size of the original dataset. Our results hold using simulated data and replication data from a well-known study. We show that there are few natural deterrents to dataset manipulation: the results in our selected subset are robust to a range of alternative specifications, our algorithm performs well under complex sampling strategies, and our subset can yield artificially high effects on multiple outcomes. We conclude by proposing a measure to prevent such manipulation in field experiments.
Work in Progress
The Economics of Women Entrepreneurs
Female-owned enterprises have the potential to spur inclusive growth and contribute to economic empowerment in settings where women have been traditionally marginalized, but current evidence finds puzzlingly low returns to both financial and human capital interventions. This project aims at understanding whether a holistic entrepreneurship program that tackles multiple growth constraints simultaneously can promote business growth and its consequences for household dynamics.
Do investments in psychological wellbeing and non-technical skills complement poverty reduction programs? Evidence from Rwanda
Linkages between psychological wellbeing, behavior, and poverty suggest that interventions that seek to improve psychological states and training in non-cognitive skills may complement traditional measures that seek to improve economic well-being. We provide evidence on the efficacy of such interventions by using a randomized control trial that benchmarks two programs against cash in terms of their impact on psychosocial and economic outcomes. The first intervention focuses on promoting a sense of agency. The second focuses on teaching skills in goal setting, public speaking, and networking. Both are relatively light-touch interventions administered through the course of 2-day workshops. We find that the intervention designed to promote agency leads to positive and significant improvements across a range of psychosocial outcomes thirteen months after the intervention, but these changes do not carry into significant gains in economic outcomes. By contrast, the non-cognitive skills workshop has little impact on psychosocial outcomes but leads to increases in economic outcomes that are statistically and economically significant.