The New Energy Compensation System in the Republic of Moldova: Benefits, Challenges and Implications of Direct Payments

Cash gives beneficiaries autonomy and can raise subjective well-being, studies suggest. Yet people in financial difficulty may spend it on immediate needs, and “mental accounting” and the “windfall effect” may divert money from energy bills. A Kenyan experiment contradicts fears about spending on “temptation goods”, while Duflo (2003) finds that resources channelled to women benefit households more. Non-cash aid curbs temptation spending but can stigmatise, seem paternalistic and limit liquidity.

The article recommends three steps: clear communication of the compensation's purpose; monitoring of how funds are used, with impact evaluation by the Government and civil society, including a comparison of how citizens perceived last year's aid and this year's; and, where possible, directing energy compensation to women.