I show that transaction costs for perishable goods create welfare loss. The loss comes from the trade-off between transaction costs and the waste that occurs when perishable goods expire, a trade-off that is compounded by liquidity constraints. I explore this trade-off using prepaid solar access time in rural Rwanda, a strictly non-storable good with transaction costs. I randomly offer 2,000 current solar customers a line of credit for solar access time, which alleviates liquidity constraints and lowers transaction costs. Consumers who previously bought in bulk respond by eliminating wasteful consumption, reducing demand by up to 6.4%. Those who are the most likely to be liquidity constrained increase demand by 88%. My results illustrate that transaction costs for perishable goods distort willingness to pay in opposite directions for different subsets of consumers. I estimate consumer surplus from electricity under the less distorted conditions of my experiment. My estimates indicate a stronger cost-benefit proposition for universal electrification than others in the literature, but indicate that marginal households' willingness to pay still falls below current cost-covering levels.
Understanding Demand for Electricity along the Intensive Margin in Rwanda and Kenya
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.
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.
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.
Price Inelastic or Price Inattentive? Demand for Electricity in Low-Income Countries
How much does adoption of electricity depend on the expected price of electricity on the intensive margin? I use the phased roll-out of an intensive-margin subsidy for solar electricity in Togo to measure consumer responses on the extensive margin. The intensive margin subsidy, which reduces the price of electricity on the intensive margin by 18-40%, increases adoption by over 70%, indicating that adoption is highly elastic with respect to intensive margin prices.