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Investment In Energy Efficiency: Do The Characteristics Of Firms Matter?

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Author Info
Stephen J. Decanio
William E. Watkins
Abstract

The literature on energy efficiency provides numerous examples of apparently profitable technologies that are not universally adopted. Yet according to the standard neoclassical theory of investment, profit-maximizing firms should undertake all investments with a positive net present value. The standard theory also holds that the discount rate for computing the present value of a project should be the return available on other projects in the same risk class, and therefore should not depend on characteristics of the firm. This model as applied to energy-saving investments is tested by examining whether firms'characteristics influence their decision to join the Environmental Protection Agency's voluntary Green Lights program. A discrete choice regression is estimated over a large sample of participating and nonparticipating firms. Missing values in the data matrix are replaced with multiple imputations from a distribution estimated using the expectation-maximization algorithm. The results show that (1) substantial improvements in the power of hypothesis tests can be achieved through maximum-likelihood imputation of missing data, and (2) contrary to the conventional theory, the characteristics of firms do affect their decision to join Green Lights and commit to a program of investments in lighting efficiency. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 80 (1998)
Issue (Month): 1 (February)
Pages: 95-107
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Handle: RePEc:tpr:restat:v:80:y:1998:i:1:p:95-107

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  1. Paroma Sanyal, 2005. "Powering a Green Progress: The Effect of Electricity Deregulation on Environmental Research," Industrial Organization 0504015, EconWPA. [Downloadable!]
  2. Nogareda, Jazmin Seijas & Ziegler, Andreas, 2006. "Green management and green technology - exploring the causal relationship," ZEW Discussion Papers 06-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  3. Newell, Richard & Anderson, Soren, 2002. "Information Programs for Technology Adoption: The Case of Energy-Efficiency Audits," Discussion Papers dp-02-58, Resources For the Future. [Downloadable!]
    Other versions:
  4. R. Bracke & T. Verbeke & V. Dejonckheere, 2007. "What distinguishes EMAS participants? An exploration of company characteristics," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/459, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
    Other versions:
  5. Ziegler, Andreas & Rennings, Klaus, 2004. "Determinants of Environmental Innovations in Germany : Do Organizational Measures Matter? ; A Discrete Choice Analysis at the Firm Level," ZEW Discussion Papers 04-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Isamu Matsukawa, 2005. "The Benefits of Information on the Efficient Usage of Consumer Durables," Others 0501005, EconWPA. [Downloadable!]
  7. Matthew Cole, Robert Elliott and Kenichi Shimamoto, 2005. "Globalization, Firm-Level Characteristics and Environmental Management: A Study of Japan," Discussion Papers 05-17, Department of Economics, University of Birmingham. [Downloadable!]
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  8. Rob Aalbers & Eline van der Heijden & Jan Potters & Daan van Soest & Herman Vollebergh, 2007. "Technology Adoption Subsidies: An Experiment with Managers," Tinbergen Institute Discussion Papers 07-082/3, Tinbergen Institute. [Downloadable!]
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