Targeting subsidies through price menus: Contract design and evidence from clean fuels | Kelsey Jack
Kelsey Jack is an Associate Professor of Environmental and Development Economics at the Bren School of Environmental Science and Management, University of California, Santa Barbara. Kesley will be discussing the paper Targeting subsidies through price menus: Contract design and evidence from clean fuels.
Targeting subsidies to maximize social objectives relies on either observable or unobservable characteristics of recipients. We adapt the theory of separation through non-linear pricing, which is common in the private sector, to a social planner’s objective. We first show that it is feasible to target subsidies through price menus. Second, we demonstrate implementation through a two stage design that first gathers the empirical inputs for a sufficient statistics based approach to menu design, and then tests the optimal contract against a budget neutral counterfactual. Our empirical setting is clean fuels for household cooking in Ghana, where the use of biomass for energy remains common and generates substantial health and environmental costs. We describe the theory, data collection for the first step of contract design and plans for the empirical evaluation.
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