Fixed Costs, Spillovers, and Adoption of Electric Connections

Barron, Manuel and Torero, Maximo (2015): Fixed Costs, Spillovers, and Adoption of Electric Connections.

Abstract

We exploit exogenous variation in the price of connection fees to study the process of adoption of for formal connection to the electric grid in northern El Salvador. This variation, generated by randomly allocating discount vouchers among households, also generated exogenous variation in the share of neighbors receiving a discount ("voucher intensity"). We find that discount vouchers accelerated demand for formal connections, especially among households with an informal connection at baseline. We provide evidence that voucher intensity did not crowd out formal connections by facilitating informal access to the grid. Finally, we show that the electric utility could increase its customer base, revenue flows and profits by sharing part of the connection fee in the early years of an electrification project.

• Item Type: MPRA Paper
• Language: English
• Keywords: Rural Electrification Spillovers Fixed Costs Adoption
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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