Arbeitspapier
Default risks, moral hazard, and market-based solution: Evidence from renewable energy market in Bangladesh
This paper analyzes a unique case of default risks and associated factors of a solar home system (SHS) program in Bangladesh and, within that context, proposes a theoretical market-based solution to finance a renewable energy (RE) program. The paper first develops a theoretical framework that highlights the problem of moral hazard in a subsidized government-sponsored program and then empirically assesses the default risks under the program. Using a primary survey data of 1,300 households, and applying probit and cox's proportional hazard model, we find that financial constraints, higher prices, natural disasters, and poor after-sales service are the factors that increase the probability of default, but in a different magnitude depending on the nature of customers. The factors that increase the probability of default for the group who are not willing to pay back (about 35% of total defaulters) are linked to adverse selection, perhaps due to moral hazard problems. The proposed market-based solution predicts that if the government uses a spillover revenue-based financing approach, it will increase the rate of return for private investors as well as the efficiency of RE programs.
- Language
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Englisch
- Bibliographic citation
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Series: ADBI Working Paper Series ; No. 1005
- Classification
-
Wirtschaft
Energy: Demand and Supply; Prices
Alternative Energy Sources
Energy and the Macroeconomy
Energy Forecasting
Energy: Government Policy
- Subject
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Bangladesh
default risks
renewable energy
market-based solutions
solar homes
spillover tax revenue
- Event
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Geistige Schöpfung
- (who)
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Hossain, Monzur
Yoshino, Naoyuki
Taghizadeh-Hesary, Farhad
- Event
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Veröffentlichung
- (who)
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Asian Development Bank Institute (ADBI)
- (where)
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Tokyo
- (when)
-
2019
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Hossain, Monzur
- Yoshino, Naoyuki
- Taghizadeh-Hesary, Farhad
- Asian Development Bank Institute (ADBI)
Time of origin
- 2019
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