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Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households

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  • Susanna B. Berkouwer
  • Joshua T. Dean

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.

Suggested Citation

  • Susanna B. Berkouwer & Joshua T. Dean, 2022. "Credit, Attention, and Externalities in the Adoption of Energy Efficient Technologies by Low-Income Households," American Economic Review, American Economic Association, vol. 112(10), pages 3291-3330, October.
    • Handle: RePEc:aea:aecrev:v:112:y:2022:i:10:p:3291-3330
    DOI: 10.1257/aer.20210766
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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