Investment In Energy Efficiency: Do The Characteristics Of Firms Matter?

Stephen DeCanio () and William E. Watkins

The Review of Economics and Statistics, 1998, vol. 80, issue 1, 95-107

Abstract: The literature on energy efficiency provides numerous examples of apparently profitable technologies that are not universally adopted. Yet according to the standard neoclassical theory of investment, profit-maximizing firms should undertake all investments with a positive net present value. The standard theory also holds that the discount rate for computing the present value of a project should be the return available on other projects in the same risk class, and therefore should not depend on characteristics of the firm. This model as applied to energy-saving investments is tested by examining whether firms'characteristics influence their decision to join the Environmental Protection Agency's voluntary Green Lights program. A discrete choice regression is estimated over a large sample of participating and nonparticipating firms. Missing values in the data matrix are replaced with multiple imputations from a distribution estimated using the expectation-maximization algorithm. The results show that (1) substantial improvements in the power of hypothesis tests can be achieved through maximum-likelihood imputation of missing data, and (2) contrary to the conventional theory, the characteristics of firms do affect their decision to join Green Lights and commit to a program of investments in lighting efficiency. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (159)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/003465398557366 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:80:y:1998:i:1:p:95-107

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().