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Modeling corner solutions with panel data: Application to the industrial energy demand in France

  • Raja Chakir

    ()

  • Alain Bousquet
  • Norbert Ladoux

This paper provides an empirical application of Lee and Pitt’s (1986) approach to the problem of corner solutions in the case of panel data. This model deals with corner solutions in a manner consistent with the firm behavior theory while controlling for unobserved heterogeneity. In this model, energy demand at industrial plant level is the result of a discrete choice of the type of the energy to be consumed and a continuous choice that defines the level of demand. The econometric model is, essentially, an endogenous switching regime model which requires the evaluation of multivariate probability integrals. We estimate the random effect model by maximum likelihood using a panel of industrial French plants from the paper and pulp industry. We calculate empirical price elasticities of energy demand from the model. We also study the effects on energy demand of an environmental policy aimed at reducing CO 2 emissions. Copyright Springer-Verlag 2004

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File URL: http://hdl.handle.net/10.1007/s00181-003-0194-0
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 29 (2004)
Issue (Month): 1 (January)
Pages: 193-208

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Handle: RePEc:spr:empeco:v:29:y:2004:i:1:p:193-208
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  1. C. Gourieroux & Jean-Jacques Laffont & A. Monfort, 1979. "Coherency Conditions In Simultaneous Linear Equation Models With Endogenous Switching Regimes," NBER Working Papers 0343, National Bureau of Economic Research, Inc.
  2. Bousquet, Alain & Ivaldi, Marc, 1998. "An individual choice model of energy mix," Resource and Energy Economics, Elsevier, vol. 20(3), pages 263-286, September.
  3. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  4. Lee, Lung-Fei & Pitt, Mark M., 1987. "Microeconometric models of rationing, imperfect markets, and non-negativity constraints," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 89-110.
  5. Alan D. Woodland, 1993. "A Micro-Econometric Analysis of the Industrial Demand for Energy in NSW," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 57-90.
  6. van Soest, A.H.O. & Kooreman, P., 1990. "Coherency of the indirect translog demand system with binding nonnegativity constraints," Other publications TiSEM 67e4b635-f504-401e-9a07-8, Tilburg University, School of Economics and Management.
  7. repec:cup:cbooks:9780521022460 is not listed on IDEAS
  8. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  9. repec:cup:cbooks:9780521815345 is not listed on IDEAS
  10. Thomas Bue Bjorner & Henrik Holm Jensen, 2002. "Interfuel Substitution within Industrial Companies: An Analysis Based on Panel Data at Company Level," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-50.
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