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



Peter Grosche and Colin Vance*

Willingness-to-Pay for Energy Conservation and

Free-Ridership on Subsidization - Evidence from Germany

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 util-
ity 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 un-
dertaking one of 16 renovation options. We use the model coefficients to de-
rive 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.

JEL Classification: C25, D12, Q4

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

August 2008

* Both RWI Essen. - The authors are indebted to Ralf Hedel for his assistance with the GIS-re-
lated calculations, and gratefully acknowledge the many helpful comments and suggestions by
Manuel Frondel, Christoph M. Schmidt, and three anonymous referees.. - All correspondence to
Peter Grosche, Rheinisch-Westfalisches Institut für Wirtschaftsforschung (RWI Essen), Hohen-
zollernstr. 1-3, 45128 Essen, Germany, e-mail:
peter.groesche@rwi-essen.de.



More intriguing information

1. Studies on association of arbuscular mycorrhizal fungi with gluconacetobacter diazotrophicus and its effect on improvement of sorghum bicolor (L.)
2. The name is absent
3. Determinants of U.S. Textile and Apparel Import Trade
4. Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries
5. Migrating Football Players, Transfer Fees and Migration Controls
6. Strategic Policy Options to Improve Irrigation Water Allocation Efficiency: Analysis on Egypt and Morocco
7. The name is absent
8. The name is absent
9. Langfristige Wachstumsaussichten der ukrainischen Wirtschaft : Potenziale und Barrieren
10. The Determinants of Individual Trade Policy Preferences: International Survey Evidence