The Effect of Information and Subsidy on Adoption of Solar Lanterns: An Application of the Bdm Bidding Mechanism in Rural Ethiopia

41 Pages Posted: 30 May 2022

See all articles by Alemu Mekonnen

Alemu Mekonnen

Addis Ababa University

Sied Hassen

Policy Studies Institute

Mónica M. Jaime

University of Concepción

Michael Toman

World Bank - Development Research Group (DECRG)

Xiaobing Zhang

Renmin University of China

Abstract

The transition to solar energy to provide clean lighting for rural households in developing countries has been slow. Using a Becker-Degroot-Marschak (BDM) bidding mechanism in a randomized field experiment, this study investigated the effect of information and subsidy policy instruments on the uptake of solar lanterns. The BDM approach used provides a more comprehensive and more transparent approach for eliciting willingness to pay (WTP), as our random draw is from a wide range of uniformly distributed prices, drawn in front of the subjects. We found that an increase in subsidy level increases the adoption rate. Provision of information about private and public benefits of the solar lantern generally did not have a significant effect on adoption rate and willingness to pay. Households with access to grid electricity have a lower WTP for the solar lantern and are thus less likely to adopt, while those using kerosene for lighting are more likely to adopt. We also find that access to credit increases WTP for the lantern. The results suggest that the Sustainable Energy for All and UN Sustainable Development Goals related to universal electricity and clean energy access may not be achieved without subsidizing household-level solar lighting.

Keywords: Ethiopia, information, market-based policy instruments, non-market policy instruments, renewable energy, solar lanterns

Suggested Citation

Mekonnen, Alemu and Hassen, Sied and Jaime, Mónica M. and Toman, Michael and Zhang, Xiaobing, The Effect of Information and Subsidy on Adoption of Solar Lanterns: An Application of the Bdm Bidding Mechanism in Rural Ethiopia. Available at SSRN: https://ssrn.com/abstract=4122776 or http://dx.doi.org/10.2139/ssrn.4122776

Alemu Mekonnen (Contact Author)

Addis Ababa University ( email )

King George VI St
Addis Ababa, 1000
Ethiopia

Sied Hassen

Policy Studies Institute ( email )

Addis Ababa
Addis Ababa, Ethiopia
Ethiopia

Mónica M. Jaime

University of Concepción ( email )

Victoria Lamas 471
Concepcion
Chile

Michael Toman

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street N.W.
MSN3-311
Washington, DC 20433
United States

Xiaobing Zhang

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, 100872
China

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