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Simulated maximum likelihood estimation of demand systems with corner solutions and panel data application to industrial energy demand

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  • Raja Chakir
  • Alban Thomas

Abstract

This paper proposes a convenient method for evaluating energy price elasticities, when firms may switch between energy regimes. The methodology involves estimation of an energy demand system that explicitly deals with the zero expenditures problem, while allowing for unobserved heterogeneity. We apply a Simulated Maximum Likelihood technique for estimating a simultaneous equation energy demand system in the French pulp and paper sector, over the period1983-1996. Endogenous regime transitions are accounted for when computing energy price elasticities. Our estimates are used to predict the outcome of an environmental policy aimed at reducing CO2 emissions in the paper and pulp industry.

Suggested Citation

  • Raja Chakir & Alban Thomas, 2003. "Simulated maximum likelihood estimation of demand systems with corner solutions and panel data application to industrial energy demand," Revue d'économie politique, Dalloz, vol. 113(6), pages 773-799.
  • Handle: RePEc:cai:repdal:redp_136_0773
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    Cited by:

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    6. Thomas, Alban & Chakir, Raja, 2020. "Unintended consequences of environmental policies: the case of set-aside and agricultural intensification," TSE Working Papers 20-1066, Toulouse School of Economics (TSE).
    7. BEL François & LACROIX Anne & SALANIE François & THOMAS Alban, 2006. "Evaluating the impact of CAP reforms on land use and the environment: a two-step estimation with multiple selection rules and panel data," LERNA Working Papers 06.13.206, LERNA, University of Toulouse.
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