Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-28T01:27:20.643Z Has data issue: false hasContentIssue false
  • English
  • Français

Energy-related financial literacy and bounded rationality in appliance replacement attitudes: evidence from Nepal

Published online by Cambridge University Press:  17 March 2020

Massimo Filippini ,
Nilkanth Kumar  and
Suchita Srinivasan Open the ORCID record for Suchita Srinivasan [Opens in a new window]
Massimo Filippini
Affiliation:
Center of Economic Research (CER-ETH), ETH Zürich, Switzerland Università della Svizzera Italiana, Switzerland
Nilkanth Kumar
Affiliation:
Center of Economic Research (CER-ETH), ETH Zürich, Switzerland
Suchita Srinivasan*
Affiliation:
Center of Economic Research (CER-ETH), ETH Zürich, Switzerland
*
*Corresponding author. E-mail: suchitas@ethz.ch
Get access Rights & Permissions [Opens in a new window]

Abstract

As countries develop, they are likely to face challenges in meeting growing energy demand and in ensuring energy security. Given this, and the problem of climate change, improving demand-side energy efficiency is pivotal to ensuring sustainable development. However, agents often underinvest in energy-efficient technologies due to behavioral failures such as low levels of energy-related financial literacy, defined as the combination of energy knowledge and cognitive abilities needed to evaluate the lifetime costs of durables. Using novel data, we analyze the levels and determinants of energy-related financial literacy of households in urban areas in the eastern lowlands of Nepal, and whether it is correlated with their attitudes towards replacement of energy-inefficient appliances. We find that respondents have low levels of energy-related financial literacy, and higher levels of literacy are associated with more rational attitudes towards appliance replacement. The findings of this study are relevant to addressing the energy-efficiency gap in developing countries.

Keywords

bounded rationalityenergy literacyfinancial literacyhouseholdsNepal

JEL classification

D12: Consumer Economics: Empirical Analysis Q48: Government Policy D80: General Q41: Demand and Supply • Prices
Type
Research Article
Information
Environment and Development Economics , Volume 25 , Issue 4 , August 2020 , pp. 399 - 422
Copyright
Copyright © The Author(s), 2020. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Allcott, H and Greenstone, M (2012) Is there an energy efficiency gap? Journal of Economic Perspectives 26, 3–28.CrossRefGoogle Scholar
Ameli, N and Brandt, N (2015) Determinants of households' investment in energy efficiency and renewables: evidence from the OECD survey on household environmental behaviour and attitudes. Environmental Research Letters 10, 1–14.CrossRefGoogle Scholar
Blasch, J, Boogen, N, Filippini, M and Kumar, N (2017a) Explaining electricity demand and the role of energy and investment literacy on end-use efficiency of Swiss households. Energy Economics 68, 89–102.CrossRefGoogle Scholar
Blasch, JE, Filippini, M, Kumar, N and Martinez-Cruz, AL (2017b) Narrowing the energy efficiency gap: the impact of educational programs, online support tools and energy-related investment literacy. CER-ETH Economics Working Paper Series, 17/276.CrossRefGoogle Scholar
Blasch, J, Boogen, N, Daminato, C and Filippini, M (2018) Empower the consumer! Energy-related financial literacy and its socioeconomic determinants. CER-ETH Economics Working Paper Series, 18/289.CrossRefGoogle Scholar
Blasch, J, Filippini, M and Kumar, N (2019) Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances. Resource and Energy Economics 56, 39–58.CrossRefGoogle Scholar
Brounen, D, Kok, N and Quigley, JM (2013) Energy literacy, awareness, and conservation behavior of residential households. Energy Economics 38, 42–50.CrossRefGoogle Scholar
Bruhn, M, Lara Ibarra, G and McKenzie, D (2014) The minimal impact of a large-scale financial education program in Mexico City. Journal of Development Economics 108, 184–189.CrossRefGoogle Scholar
Farrell, D and Remes, J (2009) Promoting energy efficiency in the developing world. McKinsey Quarterly.Google Scholar
Gillingham, K and Palmer, K (2014) Bridging the energy efficiency gap: policy insights from economic theory and empirical evidence. Review of Environmental Economics and Policy 8, 18–38.CrossRefGoogle Scholar
Hausman, JA (1979) Individual discount rates and the purchase and utilization of energy-using durables. The Bell Journal of Economics 10, 33–54.CrossRefGoogle Scholar
Jacobsen, GD (2015) Do energy prices influence investment in energy efficiency? Evidence from Energy Star Appliances 74, 94–106.Google Scholar
Jaffe, AB and Stavins, RN (1994) The energy-efficiency gap What does it mean? Energy Policy 22, 804–810.CrossRefGoogle Scholar
Jeuland, M, Pattanayak, SK and Bluffstone, R (2015) The economics of household air pollution. Annual Review of Resource Economics 7, 81–108.CrossRefGoogle Scholar
Kalmi, P, Trotta, G and Kazukauskas, A (2017) The role of energy literacy as a component of financial literacy: survey-based evidence from Finland. In Heading Towards Sustainable Energy Systems: Evolution or Revolution? Vienna, Austria: International Association for Energy Economics.Google Scholar
Karakurum-Ozdemir, K, Kokkizil, M and Uysal, G (2018) Financial literacy in developing countries. Social Indicators Research 143, 323–353.Google Scholar
Klapper, L, Lusardi, A and Van Oudheusden, P (2015) Financial literacy around the world: insights from standard and poor's ratings services global financial literacy survey (Technical report).Google Scholar
Kumar, N (2018) A descriptive overview of literacy, attitudes and behaviours towards energy consumption in Nepal (Technical report). ETH Zurich.Google Scholar
Kumar, N (2019) A model-based clustering approach for analyzing energy-related financial literacy and its determinants. CER-ETH Economics Working Paper Series, 19/312.CrossRefGoogle Scholar
Lusardi, A and Mitchell, OS (2007) Baby Boomer retirement security: the roles of planning, financial literacy, and housing wealth. Journal of Monetary Economics 54, 205–224.CrossRefGoogle Scholar
Lusardi, A and Mitchell, O (2009) Financial literacy: evidence and implications for financial education programs. Trends and issues, TIAA-CREF Institute.Google Scholar
Lusardi, A and Mitchell, OS (2011) Financial literacy around the world: an overview. Journal of Pension Economics and Finance 10, 497–508.CrossRefGoogle ScholarPubMed
Lusardi, A and Mitchell, OS (2014) The economic importance of financial literacy: theory and evidence. Journal of Economic Literature 52, 5–44.CrossRefGoogle ScholarPubMed
Lusardi, A, Mitchell, O and Curto, V (2009) Financial literacy among the young: evidence and implications for consumer policy. National Bureau of Economic Research Working Paper No. 15352.CrossRefGoogle Scholar
Mills, B and Schleich, J (2012) Residential energy-efficient technology adoption, energy conservation, knowledge, and attitudes: an analysis of European countries. Energy Policy 49, 616–628.CrossRefGoogle Scholar
Nepal Electricity Authority (2017) A Year in Review, Fiscal Year 2016/17 (Technical report). Kathmandu, Nepal.Google Scholar
Pattanayak, SK, Pakhtigian, EL and Litzow, EL (2018) Through the looking glass: environmental health economics in low and middle income countries. In Dasgupta, P, Pattanayak, SK and Smith, VK (eds.) Handbook of Environmental Economics, vol. 4. Amsterdam: Elsevier, pp. 143–191.Google Scholar
Prest, B (2020) Peaking interest: how awareness drives the effectiveness of time-of-use electricity pricing. Journal of the Association of Environmental and Resource Economists 7, 103–143.CrossRefGoogle Scholar
Schleich, J (2009) Barriers to energy efficiency: a comparison across the German commercial and services sector. Ecological Economics 68, 2150–2159.CrossRefGoogle Scholar
Sharma, B (2017) Socio-economic problems of remittance economy: the case of Nepal. Journal of Advanced Management Science 5, 285–290.CrossRefGoogle Scholar
Stern, N (2007) The Economics of Climate Change: The Stern Review. Cambridge University Press.CrossRefGoogle ScholarPubMed
Sustainable Energy for All (2015) Energy efficiency: low-hanging fruit. Available at https://www.seforall.org/news/energy-efficiency-low-hanging-fruit.Google Scholar
Tavakol, M and Dennick, R (2011) Making sense of Cronbach's alpha. International Journal of Medical Education 2, 53–55.CrossRefGoogle ScholarPubMed
Wolfram, C, Shelef, O and Gertler, P (2012) How will energy demand develop in the developing world? Journal of Economic Perspectives 26, 119–138.CrossRefGoogle Scholar
World Energy Council (2016) World energy resources report. Available at https://www.worldenergy.org/assets/images/imported/2016/10/World-Energy-Resources-Full-report-2016.10.03.pdf.Google Scholar
Xu, L and Zia, B (2012) Financial literacy around the world: an overview of the evidence with practical suggestions for the way forward. World Bank Policy Research Working Paper No. 6107.CrossRefGoogle Scholar
Supplementary material: PDF

Filippini et al. Supplementary Materials

Filippini et al. Supplementary Materials

Download Filippini et al. Supplementary Materials(PDF)
PDF 341.1 KB