Research
2024
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Dynamic Spatial Externalities in Infrastructure Connection Tariffs: Evidence from Sub-Saharan ElectrificationEugene Tan, Gabriel Gonzalez Sutil, and Joel Mugyenyi2024Even after accounting for infrastructure coverage and income, household electricity adoption rates in developing countries remain puzzlingly low in Sub-Saharan Africa. We identify a hitherto unstudied geographic externality arising from connection fees increase in distance from the grid. When first-movers adopt electricity, they induce the grid to expand towards them, making en-route and downstream neighbors closer to the grid. These neighbors then receive a lower connection fee through the policy. Ex-ante, the externality creates a strategic and dynamic incentive for the neighbor to delay their adoption even when they are willing to pay the up-front cost. Neighbors trade-off the benefits of unilateral electrification against their anticipation of future cost declines they could receive if they delayed adoption. We perform a case study of Rwandan rural electrification. We measure and instrument the time-varying incentive to delay adoption by combining the externality’s properties with network theoretic tools. Then we estimate how much the externality slows electricity uptake, by regressing household adoption decisions on our measure while controlling for static costs. We estimate that the externality reduces grid coverage by 6%, uptake by 14%, and aggregate access by 8% on average. We finally model the dynamic game played by households within an optimal stopping framework and simulate counterfactuals. Our counterfactuals reveal that Coasian and Pigouvian-like policies can speed up uptake while providing positive effects on utility revenue, and targeting central households with subsidies or solar can respectively have positive and negative cascading effects on grid rollout.
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Embedded Carbon Regulation in Global Supply ChainsEugene Tan2024Consumers and firms located in high-income countries can put pressure on final goods producers or input suppliers in low-income countries to change their technologies and production practices. To address climate change, developed countries may regulate ‘embedded’ carbon in imports, which target emissions that were emitted in the production process of a product, rather than emissions produced in its use. In doing so, developed countries are able to partially and imperfectly regulate industrial emissions emitted by developing countries. This research project first estimates the heterogeneity of embedded emissions within country-sectors using novel supply chain data. Second, it the empirical effects of such regulation, decomposing the effects of regulation into changes in technology, sourcing, and inputs.
