Using social networks to hasten a switchover

To combat the harmful effects of indoor air pollution, there¡¯s an urgent need for more efficient cooking stoves that run on clean energy sources. Like many rural regions of developing countries, rural India lacks a reliable power supply ¨C so the most viable alternative to a wood fire is a gas stove. Since liquefied petroleum gas (LPG) was introduced in the 1970s, its use has surged, especially in urban areas. However, rural Indian households still rely heavily on biomass-based fuels. According to a recent survey of rural households in some of India¡¯s poorest states, only 37% of households used LPG as their main cooking fuel in 2018².

Of the many reasons why households in India are reluctant to switch from firewood to gas, two stand out: First, LPG cylinders are still not readily available in all regions. Second, cooking with LPG is still more expensive, even though it has been subsidised by central government for many years.

Influenced by friends and neighbours

Together with my colleague Stefano Carattini from Georgia State University, I¡¯ve spent the past five years investigating the extent to which Indian households influence each other in adopting LPG. Experts speak of ¡°social spillovers¡± when households are positively influenced in their purchasing decisions by other households from the same village or urban block (e.g. ¡°I¡¯m more likely to buy LPG if my neighbours do so¡±).

We¡¯ve observed just such an effect³, and interestingly, it¡¯s particularly salient for households that are members of certain kinds of social networks: women¡¯s groups, agricultural cooperatives and NGOs play a key role in speeding up the transition to LPG. In India, such social networks play a crucial role in influencing people¡¯s behaviour in many facets of life, including their consumption decisions. In this case, we believe that the social spillovers are largely due to the fact that information on the benefits (and costs) of LPG is particularly well disseminated within such networks.

An efficient policy instrument

If households are to change to and stick to using LPG, it must be both accessible and affordable. To encourage the poorest households to switch, subsidies are likely to be essential. However, for a country like India, relying exclusively on subsidies is problematic in the long run. For one thing, subsidies lead to high public spending, which places a heavy burden on an already strained national budget. Secondly, abolishing subsidies once they have been granted can invoke opposition from the burgeoning middle class that benefits from them.

So alternative policy instruments are needed. We found that once consumers are given the initial nudge to start using a source of clean energy, they¡¯re more likely to use it if convinced that the benefits outweigh the costs. Our results show that social spillovers can positively influence not just initial adoption, but long-term adoption as well ¨C with households continuing to buy the fuel if their neighbours do so.

For policymakers looking to provide an incentive for households to change their behaviour, social spillovers may be an efficient instrument. A policy that takes social networks into account is much more cost-effective than one that ignores the network structure of society⁴. An idea here would be to provide subsidies in a targeted manner, for instance to households that are influential in their neighbourhood, or to members of particular groups or clubs.

These findings are relevant not only for India, but also for countries lagging behind India in adopting clean cooking fuels. In Benin, Burkina Faso, Guinea and Mali, more than 90% of the population still uses solid fuel for cooking. If used effectively, networks and social spillovers can persuade millions of people in developing countries to use less harmful energy sources, and so reap the benefits of better health and a better quality of life.