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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
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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

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