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Factor Price Risk and the Diffusion of Conservation Technology: Evidence from the Water Industry

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Author Info
Georgina Moreno (Scripps College)
David Sunding (UC - Berkeley)

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Abstract

The 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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File URL: http://econ.claremontmckenna.edu/papers/2001-36.pdf
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Publisher Info
Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2001-36.

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Date of creation: Dec 2001
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Handle: RePEc:clm:clmeco:2001-36

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Related research
Keywords: 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; 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

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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. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring. [Downloadable!] (restricted)
  2. MICHAEL Nieswiadomy & STEVEN L. Cobb, 1993. "Impact Of Pricing Structure Selectivity On Urban Water Demand," Contemporary Economic Policy, Western Economic Association International, vol. 11(3), pages 101-113, 07. [Downloadable!] (restricted)
  3. Nancy L. Rose & Paul L. Joskow, 1990. "The Diffusion of New Technologies: Evidence from the Electric Utility Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 354-373, Autumn. [Downloadable!] (restricted)
    Other versions:
  4. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy paradox and the diffusion of conservation technology," Resource and Energy Economics, Elsevier, vol. 16(2), pages 91-122, May. [Downloadable!] (restricted)
  5. Gale A. Boyd & Stephen H. Karlson, 1993. "The Impact of Energy Prices on Technology Choice in the United States Steel Industry," The Energy Journal, International Association for Energy Economics, vol. 14(2), pages 47-56.
  6. Pizer, William & Kopp, Raymond & Morgenstern, Richard & Harrington, Winston & Shih, Jhih-Shyang, 2002. "Technology Adoption and Aggregate Energy Efficiency," Discussion Papers dp-02-52, Resources For the Future. [Downloadable!]
  7. Sunding, David & Zilberman, David, 2001. "The agricultural innovation process: Research and technology adoption in a changing agricultural sector," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 4, pages 207-261 Elsevier. [Downloadable!] (restricted)
  8. Borch, Karl, 1969. "A Note on Uncertainty and Indifference Curves," Review of Economic Studies, Blackwell Publishing, vol. 36(105), pages 1-4, January. [Downloadable!] (restricted)
  9. Adam B. Jaffe & Richard G. Newell & Robert N. Stavins, 2000. "Technological Change and the Environment," NBER Working Papers 7970, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Abel, Andrew B, 1983. "Energy Price Uncertainty and Optimal Factor Intensity: A Mean-Variance Analysis," Econometrica, Econometric Society, vol. 51(6), pages 1839-45, November. [Downloadable!] (restricted)
  11. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May. [Downloadable!] (restricted)
  12. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
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