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

Technology can help to reduce inefficiencies and inequalities in developing countries. Although whether this happens in practice often depends on the social and geographic context. Deployment of solar home systems (SHS) across Nepal provides one such example. We examine a policy to promote SHS through a subsidy for adoption and its downstream benefits - children’s education, time allocated to agricultural and household work (both unpaid), and working for a wage. We overcome the challenges of the non-random assignment of subsidies by using geographic regression discontinuity design using (cost) distance as the assignment variable. This is based on the assumption that households cannot perfectly control the assignment variable because migrating to a different region, simply to acquire an additional solar subsidy of maximum NRs4000, is challenging and unlikely in the case of Nepal. Our results show that subsidy-eligible households are about 43% more likely to adopt SHS. We find a positive effect of the SHS adoption on the grade for age and educational z-score of children’s educations with the effect being higher on girls than boys. We also find that females are 14.2% more likely to participate and spend more time (about 19 extra days in a year) in agricultural practices by reducing their engagement in family work. However, there is no effect on the participation rates across the labour market. Results also show that males increase their contribution to household work.