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Semi-Parametric Modeling of Investments in Energy Installations

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Author Info
Lansink, Alfons Oude
Pietola, Kyosti

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Abstract

This paper applies a semi-parametric approach to estimating a generalised model of investments in energy installations. The model accounts for irreversibility and lumpiness of investments by linking a parametric specification of the unobservable dynamic shadow price to observed investment behaviour using a non-parametric specification of the adjustment cost function. The results suggest that marginal costs of investments in energy installations increase quickly at small investment levels, whereas the increase slows down at higher investment levels. Therefore, standard parametric adjustment cost models are likely biased such that they over-estimate small investments and under-estimate large investments.

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Publisher Info
Paper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24813.

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Date of creation: 2002
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Handle: RePEc:ags:eaae02:24813

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Related research
Keywords: Investments; horticulture; semi-parametric estimation; Resource /Energy Economics and Policy;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Pietola, Kyosti S & Myers, Robert J, 2000. " Investment under Uncertainty and Dynamic Adjustment in the Finnish Pork Industry," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(4), pages 956-67, November. [Downloadable!] (restricted)
  2. Pfann, Gerard A., 1996. "Factor demand models with nonlinear short-run fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 315-331. [Downloadable!] (restricted)
  3. Chang, Ching-Cheng & Stefanou, Spiro E., 1988. "Specification and estimation of asymmetric adjustment rates for quasi-fixed factors of production," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 145-151, March. [Downloadable!] (restricted)
  4. Rothschild, Michael, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, MIT Press, vol. 85(4), pages 605-22, November. [Downloadable!] (restricted)
  5. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-84, December. [Downloadable!] (restricted)
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  6. Abel, Andrew B. & Eberly, Janice C., 1997. "An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 831-852, May. [Downloadable!] (restricted)
  7. Davidson, Russell & Harris, Richard, 1981. "Non-Convexities in Continuous-Time Investment Theory," Review of Economic Studies, Blackwell Publishing, vol. 48(2), pages 235-53, April. [Downloadable!] (restricted)
  8. Pfann, Gerard A & Palm, Franz C, 1993. "Asymmetric Adjustment Costs in Non-linear Labour Demand Models for the Netherlands and U.K. Manufacturing Sectors," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 397-412, April. [Downloadable!] (restricted)
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  1. Goncharova, Natalia & Oskam, Arie J., 2006. "Investment Spikes in Dutch Horticulture: An Analysis at Firm and Aggregate Firm Level Over the Period 1975-1999," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25621, International Association of Agricultural Economists. [Downloadable!]
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