Factor Price Risk and the Diffusion of Conservation Technology: Evidence from the Water Industry

Georgina Moreno and David Loren Sunding
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Georgina Moreno: Scripps College

Claremont Colleges Working Papers from Claremont Colleges

Abstract: The paper examines the influence of factor price risk on factor-use efficiency through the adoption of conservation technology. The effect of a mean-preserving increase in factor price risk on optimal input-use efficiency is shown to be conditional on the own-price elasticity of factor use evaluated at the initial equilibrium. The conceptual analysis indicates that that there may be a discrepancy between the aggregate and firm-level effects of price risk on efficiency. Theoretical results are tested and confirmed using a unique data set from the water industry.

Keywords: technology adoption; risk; conservation; water resources; ordered probit (search for similar items in EconPapers)
JEL-codes: Q16 Q25 D81 C35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm
Date: 2001-12
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Persistent link: http://EconPapers.repec.org/RePEc:clm:clmeco:2001-36

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