Impacts of Solar Subsidy: Evidence from Geographic Regression Discontinuity Design in Nepal

Abstract

We examine a solar home systems (SHS) subsidy policy of Nepal. We first estimate the effect of additional subsidy on SHS adoption and then its downstream benefits - children’s education, time allocated to agricultural and household work (both unpaid) and working for a wage. We use geographic regression discontinuity design with (cost) distance as the assignment variable. Our results show that subsidy-eligible households are about 45% more likely to adopt SHS and 43% less likely to use kerosene lamp that emits roughly 2.1 tons of carbon dioxide equivalent GWP. We find a positive effect of the SHS adoption on the grade for age with the effect being higher on girls than boys. We also find that females are about 33% more likely to participate in work for agriculture and males are 26% more likely to participate in household work. However, there is no effect on the participation rates across the labour market.