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The Effect of Network Adoption Subsidies Evidence from Digital Traces in Rwanda

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Document pages: 9 pages

Abstract: Governments spend billions of dollars subsidizing the adoption of differentgoods. However, it is difficult to gauge whether those goods are resold, or arevalued by their ultimate recipients. This project studies a program tosubsidize the adoption of mobile phones in one of the poorest countries in theworld. Rwanda subsidized the equivalent of 8 of the stock of mobile phones forselect rural areas. We analyze the program using 5.3 billion transactionrecords from the dominant mobile phone network. Transaction records revealwhere and how much subsidized handsets were ultimately used, and indicators ofresale. Some subsidized handsets drifted from the rural areas where they wereallocated to urban centers, but the subsidized handsets were used as much ashandsets purchased at retail prices, suggesting they were valued. Recipientsare similar to those who paid for phones, but are highly connected to eachother. We then simulate welfare effects using a network demand system thataccounts for how each person s adoption affects the rest of the network.Spillovers are substantial: 73-76 of the operator revenue generated by thesubsidy comes from nonrecipients. We compare the enacted subsidy program tocounterfactual targeting based on different network heuristics.

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