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Simulated maximum likelihood estimation of demand systems with corner solutions and panel data application to industrial energy demand

  • Raja Chakir
  • Alban Thomas

This paper proposes a convenient method for evaluating energy price elasticities, when firms may switch between energy regimes. The methodology involves estimation of an energy demand system that explicitly deals with the zero expenditures problem, while allowing for unobserved heterogeneity. We apply a Simulated Maximum Likelihood technique for estimating a simultaneous equation energy demand system in the French pulp and paper sector, over the period1983-1996. Endogenous regime transitions are accounted for when computing energy price elasticities. Our estimates are used to predict the outcome of an environmental policy aimed at reducing CO2 emissions in the paper and pulp industry.

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Article provided by Dalloz in its journal Revue d'économie politique.

Volume (Year): 113 (2003)
Issue (Month): 6 ()
Pages: 773-799

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Handle: RePEc:cai:repdal:redp_136_0773
Contact details of provider: Web page: http://www.cairn.info/revue-d-economie-politique.htm

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  15. Borsch-Supan, Axel & Hajivassiliou, Vassilis A., 1993. "Smooth unbiased multivariate probability simulators for maximum likelihood estimation of limited dependent variable models," Journal of Econometrics, Elsevier, vol. 58(3), pages 347-368, August.
  16. Keane, Michael, 1993. "Simulation estimation for panel data models with limited dependent variables," MPRA Paper 53029, University Library of Munich, Germany.
  17. George Kouris, 1983. "Energy Demand Elasticities in Industrialized Countries: A Survey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-94.
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