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

25 Pages Posted: 9 Apr 2009

See all articles by Peter Grösche

Peter Grösche

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

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

Colin Vance

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

Date Written: March 1, 2009

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.

Keywords: Energy efficiency, residential sector, random utility model, discrete choice simulation

JEL Classification: C25, D12, Q4

Suggested Citation

Grösche, Peter and Schmidt, Christoph M. and Vance, Colin, Identifying Free-Riding in Energy-Conservation Programs Using Revealed Preference Data (March 1, 2009). Ruhr Economic Paper No. 99, Available at SSRN: https://ssrn.com/abstract=1375365 or http://dx.doi.org/10.2139/ssrn.1375365

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

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen) ( email )

Hohenzollernstraße 1-3
Essen, 45128
Germany
++49 201 8149-227 (Phone)
++49 201 8149-236 (Fax)

Ruhr-Universität Bochum (RUB)

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Universitätsstr. 150
D-44780 Bochum
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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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