Factor Price Risk and the Diffusion of Conservation Technology: Evidence from the Water Industry
AbstractThe paper examines the influence of factor price risk on factor-use efficiency through the adoption of conservation technology. The effect of a mean-preserving increase in factor price risk on optimal input-use efficiency is shown to be conditional on the own-price elasticity of factor use evaluated at the initial equilibrium. The conceptual analysis indicates that that there may be a discrepancy between the aggregate and firm-level effects of price risk on efficiency. Theoretical results are tested and confirmed using a unique data set from the water industry.
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Bibliographic InfoPaper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2001-36.
Date of creation: Dec 2001
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technology adoption; risk; conservation; water resources; ordered probit;
Find related papers by JEL classification:
- Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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