Migration and Fuel Choice in Rural Mexico-Abstract

Transcription

1 Migration and Fuel Choice in Rural Mexico-Abstract Dale T. Manning 1 Introduction-The economics of rural fuel use A large portion of the global population depends on firewood for energy. Use of firewood involves increased health risks and environmental degradation, has high opportunity costs, and contributes to global climate change. Policymakers worldwide are interested in encouraging the shift towards more efficient fuels. Speeding up this transition requires a complete understanding of the incentives households face when choosing their fuel mix. The movement of labor off the farm is a quintessential feature of economic development; migration plays a large role in rural economic life and may provide insights into the type of policy that can facilitate the transition away from a reliance on firewood. For example, remittances can help liquidity constrained households invest in a gas stove and provide cash for regular purchases of gas. Also changes in household size from migration can change the valuation of firewood and labor as inputs into household production. Many researchers have investigated the transition from biomass fuels to more modern fuels (Heltberg (2004), Heltberg (2005), Leach (1992), Masera and Navia (1997), Masera and Straatkamp (2000), and Ruiz-Mercado (2011)). Traditionally, investigators have thought of household fuel choice as a move from inferior traditional fuels (e.g., wood) to more efficient fuels such as kerosene or coal. After a period of transition, households begin to use the most efficient fuels that include electricity and LPG. Empirical evidence does not support this linear process, known as the Fuel Ladder (Masera and Straatkamp (2000)). Recent papers have proposed alternative models that allow households to begin using a new fuel without fully replacing the old fuel (van der Kroon (2013)). For example, a household that invests in a gas stove often continues to cook at least some meals using firewood. The papers discussed so far do not explicitly model the linked household decisions for investment and fuel use in a household-producer framework (Taylor and Adelman (2003)). Others (Baland et al (2007, Amacher et al (1996) and Amacher et al (1999)) have discussed firewood collection behavior in this context but do not explicitly model fuel choice. I fill this gap with a theoretical model that highlights the incentives faced by rural households as they maximize household utility. Results of the model show that households choose among available energy sources to minimize the cost of meeting their energy demands (even if they do not purchase firewood). Using panel data from rural Mexico, I investigate how United States migration can impact the incentives a household faces, leading to a change in the amount used of different fuels. Importantly, it may facilitate the use of LPG without eliminating the use of firewood for some energy needs. The theoretical model provides a novel way of understanding rural household fuel choices. Methodology 1 PhD Candidate, UC Davis Agricultural and Resource Economics, Contact: dtmanning@ucdavis.edu

2 To understand fuel choice, I model firewood and gas as inputs to a home-produced good in a householdproducer model (Becker, 1965). Households choose how to allocate their labor and where to spend their money in order to maximize household utility: max,,,,,,,,,.. 1 ;,,,,,, Where,,and represent the quantities of store-bought goods, home-produced food, and leisure consumed per unit of potential labor in the household. The proportion of the household living at home is δ, which also represents the proportion of the labor endowment in the household. Goods consumption per capita contributes to household utility. The household allocates its time endowment, (which can also be considered the potential labor in the household) among firewood collection (, cooking (, leisure (, work in Mexico (, and migration to the US ( 1 ). The household can also buy gas to cook with, G, at price,, and other cooking inputs, v, on the market. At home in Mexico, they receive a wage, w (potentially endogenous), for their labor. F represents the production function for firewood collected while f represents the production function for home-cooked food. Analysis of first-order conditions reveals that households will choose an optimal level of home-produced food and simultaneously minimize the cost of making that food, conditional on the capital they have available ( ). An important input into production is energy and the household will optimally combine firewood and gas (based on a shadow value of firewood and the market price of gas) to meet their total energy demand. Without a gas stove, gas purchases are constrained to zero. With a gas stove, a household can choose optimally between gas and firewood, but investing in the stove is expensive. I use a dynamic model to investigate when a household will invest in a gas stove. Part of the household decision includes how much of the household s labor endowment to send to the US to send back a planned amount of remittances, which is assumed to weakly increase in labor abroad. 1-δ represents the proportion of labor sent to the US and D will depend on the amount of labor sent. Finally, the household receives exogenous income, which could come from government transfers or could represent windfall (exogenous) remittances sent by family members in the US. Migration will reduce the household labor supply, making firewood collection relatively more expensive. At the same time, remittances will facilitate the market purchase of gas. Despite this, a household could increase firewood demand if they highly value market-purchased consumption goods. I resolve this theoretical ambiguity using household panel data to estimate an instrumental variables model of the impact of migration on migrant sending household firewood collection and gas purchases. I use a unique, representative panel data set (Encuesta Nacional a Hogares Rurales de Mexico) collected from rural Mexico in 2002 and These data allow identification of the impacts of US migration on fuel use in rural Mexican households. Identifying the impacts of migration is a challenge because the migration decision is not exogenous. Therefore, I will use migration networks to instrument for the migration decision using past migration

3 decisions at both the household and community levels (Taylor and Lopez-Feldman (2010)). My empirical model takes the following form:,,,, Where lndays is the natural log of the number of days per year a household spends collecting firewood. The log of annual gas expenditures is also used as a dependent variable. migrate takes on the value of one if a household has a migrant in the US and a zero if not. The coefficient on this variable will contain the impact of the 1-0 migration decision and of endogenous remittances that may be sent home. X includes household characteristics (income, education, wages, household size, and indigenous status) and a time trend and will be motivated by the household-producer model. 0 because people may migrate because of a lack of abundant resources in an area. Two-stage least-squares will identify the impact of migration on firewood collection (and gas expenditure).,,,, Where z could be a dummy variable indicating whether or not the household is in a Bracero community or the father of the household head lived in the US at some point in the past. Both of these instruments correlate well (F>10) with the current migration decision.,,, provides an instrument for the endogenous migration decision, and the new model is:,,, This is combined with an analysis of the stove investment decision using a Heckman selection model of the following form:,,,,, Where is the inverse-mills ratio (The Mills-ratio is the normal CDF divided by the normal PDF) evaluated at the point,,., are the variables that influence the stove investment decision in a first stage regression. are the parameters from the first stage. can only be observed if a household, has a gas stove. This regression accounts for the fact that households that purchase gas have selected into the group that can include gas in their fuel mix. Results and discussion Regression results show that households that send migrants to the US spend less time collecting firewood and buy more gas. Migrant households are between 21% and 40% more likely to have a gas stove and spend roughly 3% more on gas than non-migrant households with a gas stove. I interpret this in the theoretical framework as changing the costs and benefits of the different fuel sources. Remittances help relieve liquidity constraints and improve the ability of households to invest in gas stoves. At the same time, they provide cash for monthly gas purchases. Reduced labor-supply from migration makes firewood collection relatively more expensive. This results in a reduction in firewood use and an increase in gas use among migrant-sending households.

4 These results have several important policy implications. First of all, a complete transition away from firewood represents a corner solution in a more general model. Therefore, introducing a new fuel will not be sufficient to replace a traditional fuel. In addition, labor market imperfections imply that households do not value firewood at its market price. Comparison of the market prices of firewood and gas may not represent the appropriate comparison when looking for a gas price that should eliminate firewood use. Finally, cash transfers may help with gas stove investment and will increase the optimal amount of gas purchased while reducing the use of firewood for energy. The framework presented in this paper represents an improved way of understanding rural energy use and can lead towards a rural energy policy that more efficiently achieves its goals. References: Baland, J, P. Bardham, S. Das, D Mookherjee, and R. Sarkar The Environmental Impact of Poverty: Evidence from Firewood Collection in Rural Nepal. Working paper. Becker, Gary S A Theory of the Allocation of Time. The Economic Journal. Vol. 75, No 299, Foster, A.D., Rosenzweig, M.R., Economic growth and the rise of forests. Quarterly Journal of Economics, (May). Heltberg, R., Determinants and impact of local institutions for common resource management. Environ- ment and Development Economics 6 (2), Heltberg, Rasmus Fuel Switching: Evidence from 8 Developing Countries. Energy Economics, 26, pp Heltberg, Rasmus (2005). Factors determining household fuel choice in Guatemala. Environment and Development Economics, 10, pp Bianca van der Kroon, Roy Brouwer, and Pieter J. H. van Beukering The energy ladder: Theoretical myth or empirical truth? Results from a meta-analysis. Renewable and Sustainable Energy Reviews, 20, pp Leach, Gerald The Energy Transition. Energy Policy, pp Masera, Omar R. and Jaime Navia Fuel Switching or Multiple Cooking Fuels? Understanding Inter-Fuel Substitution Patterns in Rural Mexican Households. Biomass and Energy, Vol. 12, No. 5, pp Masera, Omar R. and Barbara D. Staatkamp From Linear Fuel Switching to Multiple Cooking Strategies: A Critique and Alternative to the Energy Ladder Model. World Development, Vol. 28 No. 12, pp Ruiz-Mercado, Ilse, OmarMasera, HildaZamora,and KirkR.Smith Adoption and sustained use of improved cookstoves. Energy Policy, vol 39, pp

5 Taylor, J. Edward and Irma Adelman Agricultural Household Models: Genesis, Evolution, and Extensions. Review of Economics of the Household 1, Taylor, J. Edward and Alejandro Lopez-Feldman. Does Migration Make Households More Productive? Evidence from Mexico. The Journal of Development Studies, 46(1),