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Modeling Corner Solutions with Panel Data: Application to Industrial Energy Demand in France

  • Alain Bousquet

    (CEA-IDEI, Université des Sciences Sociales Toulouse I)

  • Raja Chakir

    ()

    (GREMAQ, Université des Sciences Sociales)

  • Norbert Ladoux

    (CEA-IDEI, Université des Sciences Sociales Toulouse I)

This paper is providing an initial empirical application of Lee and Pitt's approach to the problem of corner solutions with panel data. This approach deals with corner solutions in a manner consistent with behavioral theory. Furthermore it allows the use of flexible form cost functions and general error structure. In this model energy demand, at industrial plant level, is the result of a discrete choice of type of energy to consume and a continuous choice to define the demand level. The econometric model is essentially an endogenous switching regime model which require the evaluation of multivariate probability integrals. We estimate the random effect model by maximum likelihood using a panel of industrial French plants. We verify that estimations predict globally well the model and we simulate the effects of prices variations and a CO2 tax on energy demand.

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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number C3-2.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:c3-2
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  1. Lee, Lung-Fei & Pitt, Mark M, 1986. "Microeconometric Demand Systems with Binding Nonnegativity Constraints: The Dual Approach," Econometrica, Econometric Society, vol. 54(5), pages 1237-42, September.
  2. Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
  3. Bousquet, Alain & Ivaldi, Marc, 1991. "An Individual Choice Model of Energy Mix," IDEI Working Papers 4, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  5. Schmidt, Peter, 1990. "Three-stage least squares with different instruments for different equations," Journal of Econometrics, Elsevier, vol. 43(3), pages 389-394, March.
  6. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
  7. G. S. Maddala, 1987. "Limited Dependent Variable Models Using Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 22(3), pages 307-338.
  8. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
  9. Chiang, J. & Lee, L-F., 1990. "Discrete/Continuous Models of Consumer Demand with Binding Non-Negativity Constraints," Papers 261, Minnesota - Center for Economic Research.
  10. Heckman, James J & Macurdy, Thomas E, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 47-74, January.
  11. 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.
  12. Mark M. Pitt & Daniel L. Millimet, 1999. "Estimation of Coherent Demand Systems with Many Binding Non-Negativity Constraints," Working Papers 99-4, Brown University, Department of Economics.
  13. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  14. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  15. repec:cup:cbooks:9780521338257 is not listed on IDEAS
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