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Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data

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Author Info
Gilbert E. Metcalf
Kevin A. Hassett

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Abstract

An important factor driving energy policy over the past two decades has been the Energy Paradox,' the perception that consumers apply unreasonably high hurdle rates to energy saving investments. We explore one possible explanation for this apparent puzzle: that realized returns fall short of the returns promised by engineers and product manufacturers. Using a unique data set, we find that the realized return to attic insulation is statistically significant, but the median estimate (12.3 percent) is close to a discount rate for this investment implied by a CAPM analysis. We conclude that the case for the Energy Paradox is weaker than has previously been believed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6074.

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Date of creation: Jun 1997
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Publication status: published as Review of Economics and Statistics, Vol. 81, no. 3 (1999): 516-528.
Handle: RePEc:nbr:nberwo:6074

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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. Herbert, John H & Kreil, Erik, 1989. "Specifying and Evaluating Aggregate Monthly Natural-Gas Demand by Households," Applied Economics, Taylor and Francis Journals, vol. 21(10), pages 1369-81, October.
  3. Hartman, Raymond S. & Doane, Michael J., 1987. "Taking the con out of conservation program evaluation," Resources and Energy, Elsevier, vol. 9(2), pages 187-207, August. [Downloadable!] (restricted)
  4. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-98, November. [Downloadable!] (restricted)
  5. Narayana R. Kocherlakota, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March. [Downloadable!] (restricted)
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(explanations, 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. Stavins, Robert N. & Jaffe, Judson & Schatzki, Todd, 2007. "Too Good to Be True? Three Economic Assessments of California Climate Change Policy," Discussion Papers dp-07-12, Resources For the Future. [Downloadable!]
  2. Isamu Matsukawa, 2005. "The Benefits of Information on the Efficient Usage of Consumer Durables," Others 0501005, EconWPA. [Downloadable!]
  3. Robert Stavins & Judson Jaffe & Todd Schatzki, 2007. "Too Good to Be True? An Examination of Three Economic Assessments of California Climate Change Policy," NBER Working Papers 13587, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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