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

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  • Bousquet, Alain
  • Chakir, Raja
  • Ladoux, Norbert

Abstract

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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Suggested Citation

  • Bousquet, Alain & Chakir, Raja & Ladoux, Norbert, 2003. "Modeling Corner Solutions with Panel Data: Application to the Industrial Energy Demand in France," IDEI Working Papers 230, Institut d'Économie Industrielle (IDEI), Toulouse.
    • Handle: RePEc:ide:wpaper:575
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    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.
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    3. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    4. Van Soest, Arthur & Kooreman, Peter, 1990. "Coherency of the indirect translog demand system with binding nonnegativity constraints," Journal of Econometrics, Elsevier, vol. 44(3), pages 391-400, June.
    5. 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.
    6. 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.
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    8. 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.
    9. Nerlove,Marc, 2005. "Essays in Panel Data Econometrics," Cambridge Books, Cambridge University Press, number 9780521022460.
    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.
    11. 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.
    12. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    13. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, vol. 5(1), pages 89-116, January.
    14. 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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    Cited by:

    1. repec:spr:eurase:v:7:y:2017:i:3:d:10.1007_s40822-017-0079-8 is not listed on IDEAS
    2. Bousquet, Alain & Ladoux, Norbert, 2006. "Flexible versus designated technologies and interfuel substitution," Energy Economics, Elsevier, vol. 28(4), pages 426-443, July.
    3. Bölük, Gülden & Koç, A. Ali, 2010. "Electricity demand of manufacturing sector in Turkey: A translog cost approach," Energy Economics, Elsevier, vol. 32(3), pages 609-615, May.
    4. Rosario Crinò, "undated". "Service Offshoring and White-Collar Employment," Working Papers 391, Barcelona Graduate School of Economics.
    5. Koutchade, Obafèmi Philippe & Carpentier, Alain & Femenia, Fabienne, 2015. "Corner solutions in empirical acreage choice models: an andogeneous switching regime approach with regime fixed cost," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206060, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    6. Millimet, Daniel L. & Tchernis, Rusty, 2008. "Estimating high-dimensional demand systems in the presence of many binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 147(2), pages 384-395, December.
    7. Rosario Crino, 2006. "Are U.S. White-Collar Really at Risk of Service Offshoring?," KITeS Working Papers 183, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2006.

    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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