Publication - Working Paper
Street vendors play a major role in the market for goods and services in India, numbering over 10 million people and predominantly represented by the urban poor. Worldwide estimates place street trading as the largest employment subgroup in the informal sector, after home-based workers. However, the ability of these microenterprises (defined as firms employing less than six people) to profit from and grow their businesses is severely constrained by lacking infrastructure. Working in the informal sector, many street vendors have no access to basic infrastructure.
This lack of access, or alternately the high costs of self-generated electricity, disproportionately affects small firms, increasing their total costs of doing business, reducing their profits, and lowering their quality of life. What are the effects of providing access to low-cost, off-grid, renewable energy on the dynamics of microenterprises in the informal sector?
We propose answering this question through a field experiment that randomly distributes access to energy efficient technology to microenterprises in India. We will deploy solar-power lanterns for urban and peri-urban street vendors in the Indian state of Bihar who currently rely on kerosene, liquefied petroleum gas (LPG), and other expensive/ineffective sources of lighting for their lighting and power needs. This treatment of solar light is expected to reduce fuel expenditures, improve sales, and generate additional income for these small-scale entrepreneurs. To measure the effectiveness of the intervention, we will collect survey data from the traders.
Our project aims at generating knowledge about several key aspects of the infrastructural problems that microenterprises in India face. First, does solar lighting allow significant savings in fuel expenditures? While the solar equipment requires a capital investment, the operating costs are much lower than those of traditional solutions, such as kerosene or LPG.
Second, does solar lighting improve sales at night? Poor lighting is a major deterrent to the purchase of products such as fruit and meals. If solar power can improve lighting, street vendors could increase their sales revenue.
Third, does solar lighting result in an observable increase in savings and investment? If street vendors secure gains from solar lighting, it is important to evaluate how these gains are used. If they are used to save money or invest in the business, their catalytic effects on the Bihari economy could be large. Finally, is solar lighting a cost-effective and environmentally sustainable solution? We can compare data on the results of the intervention against results from other impact assessments to see how well solar lighting performs relative to other potential interventions. We can also compute the environmental and energy security benefits of fuel savings. For example, the kerosene that some street vendors currently use emits black carbon, a potent greenhouse gas.