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The Power of Mandatory Quality Disclosure: Evidence from the German Housing Market

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  • Manuel Frondel
  • Andreas Gerster
  • Colin Vance

Abstract

Numerous countries have introduced energy performance certificates to mitigate the information asymmetry with respect to the thermal quality of houses. Motivated by a stylized theoretical model and drawing on comprehensive data on real estate advertisements in the German housing market, this paper investigates the causal effect of disclosing energy information on the asking prices of houses. Employing within-variation from panel data, augmented by an instrumental variable approach to isolate effects among policy compliers, our analysis demonstrates the power of mandatory disclosure rules to increase market transparency and to align prices with the energy performance of the house. Among our key results, we find that house owners reduce offer prices in response to the disclosure of energy efficiency information. Furthermore, this effect is particularly pronounced for owners who would not disclose in the absence of the mandatory disclosure policy.

Suggested Citation

  • Manuel Frondel & Andreas Gerster & Colin Vance, 2020. "The Power of Mandatory Quality Disclosure: Evidence from the German Housing Market," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(1), pages 181-208.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/705786
    DOI: 10.1086/705786
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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