Willingness to pay for improved energy: Evidence from Kenya

- Study is based on energy survey targeting both households and enterprises.
- Heckman sample selection model is used to explain the difference in valuation of willingness to pay.
- There is positive willingness to pay for improved energy sources.
- Education, gender, income, location, gender, energy price explained the household valuations of WTP.
- Type of sector, location, number of employees explained the enterprises valuation of WTP.

Using a sample respondents of 3665 households and 1669 enterprises, this paper utilizes a double bound, open-ended, contingent valuation approach where those who respond positively to the willingness to pay question, were asked to state the maximum amount they were willing to pay as quality levy. The paper identifies protest responses as those respondents who are not willing to pay for the proposed program or as outliers who may state a willingness to pay value either higher or lower than the average willingness to pay value. Bidders and genuine zeros responses are respondents that either state a zero or a positive willingness to pay respectively. Heckman's sample-selection procedure is used to test sample selection bias in and also analyze the WTP function.The mean household willingness to pay as quality levy was estimated to be US$ 6.53, US$ 3.85 and US $ 6.34 monthly for firewood, charcoal and electricity respectively while the enterprise willingness to pay as quality levy was estimated to be US $ 355.92 monthly. Income, type of dwelling, education, gender, price, location, type of enterprise and size of employees were identified as important factors that explained the differences in the WTP variations.