Money or Power? Choosing Covid-19 aid in Kenya

Susanna Berkouwer, Pierre Biscaye, Eric Hsu, Oliver Kim, Kenneth Lee, Edward Miguel and Catherine Wolfram

Energy Economics, 2023, vol. 127, issue PB

Abstract: In response to the Covid-19 crisis, 186 countries implemented direct cash transfers to households, and 181 introduced in-kind programs that lowered the cost of utilities such as electricity, water, transport, and mobile money. During times of crisis, do people prefer in-kind transfers or cash, and why? In this paper, we compare electricity transfers against a benchmark of cash transfers (mobile money) among 2000 rural and urban residents of Kenya with pre-paid electricity meter connections. We offer participants an incentivized choice between electricity transfers or mobile money, totaling approximately USD 10 to 15, and then implement their choice over three months. We generate three main findings. First, participants overwhelmingly prefer cash, with three-quarters of participants opting for mobile money even when offered electricity tokens with a cash value that is 40 percent higher, possibly due to the flexibility in expenditures or credit constraints. Second, despite relatively low baseline electricity consumption, preference for cash is slightly lower in rural areas, possibly due to higher transaction costs for purchasing electricity, lower mobile money penetration, or savings constraints. Third, electricity tokens transfers generate a larger increase in electricity consumption than equivalent cash transfers, suggesting a role for mental accounting; however, we estimate no impact of either electricity or cash transfers on a broad set of socioeconomic outcomes. These patterns suggest that mobile money transfers generate larger welfare gains than electricity credit, at least in settings with high mobile money penetration.

Keywords: Development economics; Cash transfers; Electricity subsidies; Government programs; Utility subsidies; Kenya (search for similar items in EconPapers)
JEL-codes: D04 H23 I38 L94 O12 O13 Q48 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pb:s0140988323005340

DOI: 10.1016/j.eneco.2023.107036

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