Willingness-to-Pay for Energy Conservation and Free-Ridership on Subsidization - Evidence from Germany

31 Pages Posted: 8 Oct 2008

See all articles by Peter Grösche

Peter Grösche

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

Date Written: August 1, 2008

Abstract

Understanding the determinants of home-efficiency improvements is significant to a range of energy policy issues, including the reduction of fossil fuel use and environmental protection. This paper analyzes retrofit choices by assembling a unique data set merging a nationwide household survey from Germany with regional data on wages and construction costs. To explore the influence of both heterogeneous preferences and correlation among the utility of alternatives, conditional, random parameters, and error components logit models are estimated that parameterize the influence of costs, energy savings, and household-level socioeconomic attributes on the likelihood of undertaking one of 16 renovation options. We use the model coefficients to derive household-specific marginal willingness-to-pay estimates, and with these assess the extent to which free-ridership may undermine the effectiveness of recently implemented programs that subsidize the costs of retrofits.

Keywords: Heterogenous preferences, residential sector, revealed-preference data

JEL Classification: C25, D12, Q4

Suggested Citation

Grösche, Peter and Vance, Colin, Willingness-to-Pay for Energy Conservation and Free-Ridership on Subsidization - Evidence from Germany (August 1, 2008). Ruhr Economic Paper No. 58. Available at SSRN: https://ssrn.com/abstract=1280903 or http://dx.doi.org/10.2139/ssrn.1280903

Peter Grösche (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://www.rwi-essen.de/groesche

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
0049-201-8149-237 (Phone)

HOME PAGE: http://www.rwi-essen.de

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