Community Pressure and Clean Technologies in the Informal Sector: An Econometric Analysis of the Adoption of Propane by Traditional Brickmakers in Ciudad Juarez, Mexico
In many developing countries the informal sector, comprised of low-technology unlicensed micro-enterprises, is a major source of pollution. Environmental management in this sector is exceptionally challenging, even by developing country standards. Though clean technologies offer a means of mitigating the problem, to our knowledge there has been no rigorous empirical research on why informal (or even small-scale) firms do and do not adopt them. As a first step towards filling this gap, this paper presents the results of an econometric analysis of the diffusion of propane among informal 'traditional' brickmakers in Cd. Juárez, Mexico — a leading source of air pollution owing to their reliance on cheap, highly polluting fuels such as used tires and scrap wood. The three key policy implications of our analysis are that: (1) community pressure applied by private-sector trade and neighborhood organizations can generate strong incentives for informal firms to adopt clean technologies, presumably even in the absence of formal regulatory pressure, (2) it is possible to successfully promote the adoption of a clean technology by intensely competitive informal firms even when the new technology significantly raises variable costs, and (3) training and education — in particular the dissemination of information about the health risks associated with dirty technologies — can be an effective means of promoting adoption.
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