Community Pressure and Clean Technology in the Informal Sector: An Econometric Analysis of the Adoption of Propane by Traditional Mexican Brickmakers

In many developing countries the informal sector, comprised of low-technology unlicensed micro-enterprises, is a major source of pollution. Environmental management in this sector is exceptionally challenging. Though clean technologies offer a means of mitigating the problem, to our knowledge there has been no rigorous empirical research on why informal (or even small-scale) firms do and do not adopt them. As a first step towards filling this gap, this paper presents the results of an econometric analysis of the diffusion of propane among informal 'traditional' brickmakers in Cd. Juárez, Mexico--a leading source of air pollution owing to their reliance on cheap, highly polluting fuels such as used tires and scrap wood. The two key policy implications of our analysis are that: (1) it is possible to successfully promote the adoption of a clean technology by intensely competitive informal firms even when the new technology significantly raises variable costs, and (2) community pressure applied by competing firms and private-sector local organizations can generate incentives for adoption.