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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Alain Bousquet & Raja Chakir & Norbert Ladoux, 2002. "Modeling Corner Solutions with Panel Data: Application to Industrial Energy Demand in France," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C3-2, International Conferences on Panel Data.
  • Handle: RePEc:cpd:pd2002:c3-2
    as

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    References listed on IDEAS

    as
    1. 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.
    2. Chiang, Jeongwen & Lee, Lung-Fei, 1992. "Discrete/continuous models of consumer demand with binding nonnegativity constraints," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 79-93.
    3. 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.
    4. Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257, April.
    5. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    6. Bousquet, Alain & Ivaldi, Marc, 1998. "An individual choice model of energy mix," Resource and Energy Economics, Elsevier, vol. 20(3), pages 263-286, September.
    7. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    8. Schmidt, Peter, 1990. "Three-stage least squares with different instruments for different equations," Journal of Econometrics, Elsevier, vol. 43(3), pages 389-394, March.
    9. 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.
    10. 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.
    11. 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.
    12. Lee, Lung-Fei & Pitt, Mark M, 1986. "Microeconometric Demand Systems with Binding Nonnegativity Constraints: The Dual Approach," Econometrica, Econometric Society, vol. 54(5), pages 1237-1242, September.
    13. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    14. 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.
    15. James J. Heckman & Thomas E. Macurdy, 1980. "A Life Cycle Model of Female Labour Supply," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 47-74.
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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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