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Identifying Free-Riding in Energy-Conservation Programs Using Revealed Preference Data

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  • Grösche, Peter
  • Schmidt, Christoph M.
  • Vance, Colin

Abstract

Identifying the incidence of free-ridership is significant to a range of issues relevant to program evaluation, including the calculation of net program benefits and more general assessments of political acceptability. Estimates of free-ridership in the area of energy policy frequently rely on ex-post surveys that ask program participants whether they would have behaved differently in the absence of program support. The present paper proposes an ex-ante approach to the calculation of the free-rider share using revealed preference data on home renovations from Germany's residential sector. We employ a discrete-choice model to simulate the effect of grants on renovation choices, the output from which is used to assess the extent of free-ridership under a contemporary subsidy program. Aside from its simplicity, a key advantage of the approach is that it bestows policymakers with an estimate of free-ridership prior to program implementation.

Suggested Citation

  • Grösche, Peter & Schmidt, Christoph M. & Vance, Colin, 2009. "Identifying Free-Riding in Energy-Conservation Programs Using Revealed Preference Data," Ruhr Economic Papers 99, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:99
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    References listed on IDEAS

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    1. repec:cdl:econwp:qt3tb6j874 is not listed on IDEAS
    2. repec:cdl:uctcwp:qt3tb6j874 is not listed on IDEAS
    3. repec:cdl:uctcwp:qt1j6814b3 is not listed on IDEAS
    4. repec:cdl:econwp:qt1j6814b3 is not listed on IDEAS
    5. Cameron, Trudy Ann, 1985. "A Nested Logit Model of Energy Conservation Activity by Owners of Existing Single Family Dwellings," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 205-211, May.
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    Citations

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    Cited by:

    1. Nicholas Rivers and Leslie Shiell, 2016. "Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    2. Wasi, Nada & Carson, Richard T., 2013. "The influence of rebate programs on the demand for water heaters: The case of New South Wales," Energy Economics, Elsevier, vol. 40(C), pages 645-656.
    3. Marie-Laure Nauleau, 2013. "Heavy subsidization reduces free-ridership : Evidence from an econometric study of the French dwelling insulation tax credit," Working Papers hal-00866445, HAL.
    4. Löschel, Andreas & Reif, Christiane & Kesternich, Martin & Koesler, Simon & Osberghaus, Daniel & Korioth, Stefan, 2011. "Lösungsansätze zur systemeffizienten Ausgestaltung der nationalen Mittelverwendung der Einnahmen aus der Versteigerung von Zertifikaten im Rahmen des EU-ETS: Endbericht, März 2011," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 110535.
    5. Marie-Laure Nauleau, 2013. "Heavy subsidization reduces free-ridership : Evidence from an econometric study of the French dwelling insulation tax credit," CIRED Working Papers hal-00866445, HAL.

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    Keywords

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    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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