the effective tax rate and the pretax rate of return abstract this paper presents new estimates of the taxes paid on nonfinancial corporate capital on the pretax rate of return to capital and on the effective tax rate the basic time series show that both the pretax rate of return and the effective tax rate have varied substantially in the past quarter century an explicit analysis indicates that after adjusting for different aspects of the business cycle pretax profitability was between one and 1 5 percentage points lower in the 1970s than in the 1960s the rate of profitability in the 1960s was also about one half of a percentage point greater than the profitability in the 7 years of the 1950s after the korean war changes in productivity growth in inflation in relative unit labor costs and in other variables are all associated with changes in profitability none of these variables however can explain the differences in profitability between the 1950s 1960s and 1970s looking at broad decade averages the effective tax rate and the pretax rate of return move in opposite directions lower pretax profits occuring when the tax rate is high there thus appears to have been no tendency for pretax profits to vary in a way that offsets differences in effective tax rates

the experience curve option value and the energy paradox abstract this paper develops a model to explain the energy paradox the inclination of households and firms to require very high internal rates of return in order to make energy saving investments the model abstracts from many features of such investments to focus on their irreversibility the uncertainty of their future payoff streams and the investor s anticipation of future technological advance in this setting the decision to invest in energy saving technology can be delayed providing option value in addition delay allows the potential investor to cash in on future experience curve effects with the passage of time firms gain practical knowledge in producing and installing the energy saving technology enabling them to reduce the technology s up front cost per unit of energy saved we incorporate these fundamentals into a stochastic model where the investment s discounted benefits follow geometric brownian motion to demonstrate the model s capabilities we generate simulation results for photovoltaic systems that highlight the experience curve effect as a fundamental reason why households and firms delay making energy saving investments until internal rates of return exceed values of 50 and higher consistent with observations in the economics literature we also explore altruistic motivations for energy conservation and the model s implications for both additionality and the design of energy conservation policy

estimating energy savings due to conservation programmes the bpa residential weatherization pilot programme abstract the bonneville power administration operated a residential weatherization pilot programme from 1980 to 1982 the programme provided free home energy audits to more than 7000 electrically heated homes in the pacific northwest and gave zero interest loans to weatherize over 4000 of these homes the total cost of the programme was 11 million this paper describes several mehtods used to estimate the net energy saving effect of the bpa programme ie the electricity saving that could be directly attributed to the programme the simplest method ivolves estimation of weather adjusted annual electricity consumption for each household the second approach uses this weather adjusted consumption as the dependent variable in a pooled time series cross section regression model of electricity use the third approach involves estimation of qualitative choice models of the decisions to retrofit and to participate in the bpa programme results from these models are used to define mills ratio terms that are then used as explanatory variables in the regression model of the second approach the range in estimated programme saving given the diversity of analytical methods used is surprisingly small 3100 3300 kwh year per average programme participant

is there an energy efficiency gap many analysts have argued that energy efficiency investments offer an enormous win win opportunity to both reduce negative externalities and save money this overview paper presents a simple model of investment in energy using capital stock with two types of market failures first uninternalized externalities from energy consumption and second forces such as imperfect information that cause consumers and firms not to exploit privately profitable energy efficiency investments the model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision energy efficiency subsidies and standards may be merited this chapter therefore reviews the empirical work on the magnitude of profitable unexploited energy efficiency investments a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured these problems notwithstanding recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering accounting studies suggest finally there is tremendous opportunity and need for policy relevant research that utilizes randomized controlled trials and quasi experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs

a new look at residential electricity demand using household expenditure data the recent push for a federal energy policy that could substantially change electricity prices in the u s highlights the need to obtain accurate residential electricity demand estimates many electricity demand estimates have been obtained based on the assumption that consumers optimize with respect to known marginal prices but increasing empirical evidence suggests that consumers are more likely to respond to average prices under this assumption this paper develops a new strategy based on gmm to estimate household electricity demand our approach allows a national level demand estimation from publicly available expenditure data and utility level consumption data complementing studies that use individual billing data which are richer yet often proprietary we estimate the price elasticity near 1 which is at the upper end in magnitude among the estimates from previous studies we apply our elasticity estimates in a u s climate policy simulation to determine how these elasticity estimates alter consumption and price outcomes compared to the more conservative elasticity estimates commonly used in policy analysis

residential consumption of gas and electricity in the u s the role of prices and income abstract we study the residential demand for electricity and gas working with nationwide household level data that cover recent years namely 1997 2007 our dataset is a mixed panel multi year cross sections of dwellings households in the 50 largest metropolitan areas in the united states as of 2008 we estimate static and dynamic models of electricity and gas demand we find strong household response to energy prices both in the short and long term from the static models we get estimates of the own price elasticity of electricity demand in the 0 860 to 0 667 range while the own price elasticity of gas demand is 0 693 to 0 566 these results are robust to a variety of checks contrary to earlier literature metcalf and hassett 1999 reiss and white 2005 we find no evidence of significantly different elasticities across households with electric and gas heat the price elasticity of electricity demand declines with income but the magnitude of this effect is small these results are in sharp contrast to much of the literature on residential energy consumption in the united states and with the figures used in current government agency practice our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated

measuring the energy savings from home improvement investments evidence from monthly billing data an important factor driving energy policy over the past two decades has been the energy paradox the perception that consumers apply unreasonably high hurdle rates to energy saving investments we explore one possible explanation for this apparent puzzle that realized returns fall short of the returns promised by engineers and product manufacturers using a unique data set we find that the realized return to attic insulation is statistically significant but the median estimate 9 7 is almost identical to a discount rate for this investment implied by a capm analysis we conclude that the case for the energy paradox is weaker than has previously been believed

energy efficiency and rebound effects an econometric analysis of energy demand in the commercial building sector it is widely recognized that the adoption of energy saving innovations can induce an increase in the usage of the corresponding technologies and thus can possibly increase energy consumption among other concerns is that uncertainties regarding the magnitude of this rebound effect can deter policy makers from promoting energy efficiency this paper analyzes the rebound effects of the adoption of energy efficient technologies in commercial buildings based upon a structural model of technology adoption and subsequent energy demand at the building level the empirical results are that energy efficiency can reduce electricity use by about 35 and natural gas consumption by about 50

rent seeking bureaucracies and oversight in a simple growth model abstract following recent cross country empirical work research on public policy and growth has come to examine the impact of inefficient or corrupt bureaucracies most of this work has emphasized the interactions of bureaucracies with private markets by contrast this paper focuses on the relationship between rent seeking bureaucracies and their political authority we show that when oversight is relatively costly as in many developing economies the political authority exercises little monitoring of its agencies which reduces the effectiveness of productive government spending moreover when the technology used to provide public services is poor bureaus better succeed in requesting overly large budgets before triggering any monitoring both of these characteristics contribute to reducing the growth rate of already poor economies

setting the standard a framework for evaluating the cost effectiveness of building energy standards abstract the adoption rate and stringency of building energy standards in the u s have been increasing since the mid 1990s as a result of the energy policy act mandate of 1992 epact current evidence on the energy savings that accrue from commercial building energy standards is based on engineering simulations which do not account for realized behaviour once a standard is actually adopted this paper uses quasi experimental variation in commercial building energy standard adoptions to estimate their effect on realized electricity consumption and cost effectiveness in states induced by epact to adopt an energy standard where all new nonresidential construction was erected under a commercial standard electricity consumption per service worker is lower by about 12 and total commercial electricity consumption is lower by 10 including early adopters and never adopters to the analysis leads to a downward bias in the treatment effect the realized electricity savings in the epact states represent three quarters of predicted simulated savings and electricity saved in 2010 came at a cost of approximately 7 7 cents per kwh

is energy efficiency capitalized into home prices evidence from three u s cities abstract we test for evidence that energy efficiency features are capitalized into home prices in three u s metropolitan areas using hedonic regressions and multiple matching procedures we find that energy star certification is associated with higher sales prices in two of the markets the research triangle region of north carolina and portland oregon we find that local green certifications in portland and in austin texas are also associated with higher prices and that the estimated price impacts are larger than those from energy star matching on observables proves to be important in some cases reducing the estimated impacts compared with models without matching we calculate the implied energy savings from the estimated premiums and find that in the research triangle market the energy star premiums approximately equal the savings that program is designed to achieve but in portland the premiums are slightly greater than the program s savings due to low energy costs in the region

markets for energy efficiency exploring the implications of an eu wide tradable white certificate scheme recent developments in european energy policy reveal an increasing interest in implementing the so called tradable white certificate twc schemes to improve energy efficiency based on three evaluation criteria cost effectiveness environmental effectiveness and distributional equity this paper analyses the implications of implementing a european wide twc scheme targeting the household and commercial sectors using a bottom up model quantitative results show significant cost effective potentials for improvements ca 1400 twh in cumulative energy savings by 2020 with the household sector gas and space heating representing most of the twc supply in terms of eligible sector fuel and energy service demand respectively if a single market price of negative externalities is considered a societal costeffective potential of energy savings above 30 compared to the baseline is observed in environmental terms the resulting greenhouse gas emission reductions are around 200mt co2 eq by 2010 representing nearly 60 of the eu kyoto target from the qualitative perspective several embedded ancillary benefits are identified e g employment generation improved comfort level reduced fuel poverty security of energy supply whereas an eu wide twc increases liquidity and reduces the risks ofmarket power autarky compliance strategies may be expected in order to capture co benefits nationally cross subsidies could occur due to investment recovery mechanisms and there is a risk that effects may be regressive for low income households assumptions undertaken by the modelling approach strongly indicate that high effectiveness of other policy instruments is needed for an eu wide twc scheme to be cost effective less

the causes of government expenditure growth a survey of the u s evidence abstract the growth of government budgets can be broken down into a institutional and institutional components the former component the familiar substitution income and population public goods tax sharing effects is estimated to contribute about two fifths of the growth of u s government spending the latter component rent seeking political redistributions bureaucracy and perceptual informational impedimentia is important too but an exact imputation cannot be asserted given the state of the art in empirical public choice theory the cross effects on spending of the growth of regulation and tax preferences or tax expenditures though interesting is not pursued

political and economic influences on the bureaucratic allocation of federal funds the case of urban development action grants abstract the distributive theory of politics predicts that federal budget allocations will be responsive to the committee position of congressmen and their majority minority party status but such political allocations are less likely where bureaucrats rather than legislators make the allocative decisions in such cases we must take into account bureaucratic motivations as well niskanen s bureaucratic budget maximization theory emphasizes such bureaucratic maximands and the efficient production of output or activity by the budget constrained bureau in this paper the two theories are tested using data from the urban development action grant program a capital subsidy program operated by the department of housing and urban development a set of political and bureaucratic decision criteria is employed as independent variables in a series of logit and tobit models in order to predict the likelihood of projects being funded and the amounts they will receive the political criteria are not significant in any specifications but the bureaucratic criteria suggest an investment maximizing risk avoidance strategy on the part of hud bureaucrats thus the results support the niskanen theory but do not support the distributive theory

an entry and exit model on the energy saving investment strategy with real options this paper presents an improved decision model based on the real options approach presented by ansar and sparks 2009 for the firms that have not yet established energy saving equipment under the entry and exit strategies furthermore the proposed model takes account of the inevitable equipment renewal and the occurrence of unexpected events under the poisson jump process the timing for terminating an investment when continuous operations of that business are unprofitable is also explored to realize the optimal timing of implementing the energy saving strategy the future discounted benefit b follows the geometric brownian motion with the poisson jump process and the replacement of investment equipment a numerical analysis is followed by a sensitivity study of various parameters to better realize their impacts on the entry and exit thresholds the results show that for the jump case the higher probability of occurrence of unfavorable events will result in a higher entry threshold and lower exit threshold investors are forced to request higher benefit thresholds to cover the higher probability of losses brought by unfavorable events

modeling government behavior in collective bargaining a test for self interested bureaucrats this paper tests for self interested behavior by local government bureaucrats engaged in collective bargaining with public employee unions a theoretical model is developed that shows the effect of niskanen style bureaucratic self interest in the two standard bargaining models the demand constrained model and the efficient bargain model these predictions are then tested using national cross section data on unionized police fire and sanitation workers

limits to arbitrage and the term structure of bond illiquidity premiums abstract theoretical models suggest that the relation of speculators capital and market liquidity is highly nonlinear changes in capital only marginally affect liquidity when capital is available abundantly but have a large effect when capital is scarce in this paper we confirm this relation within a regime switching model using three broad measures of german bond market liquidity we then analyze how the term structure of illiquidity premiums of german agency bonds is related to intermediaries capital and foreign flows illiquidity premiums are related to both variables only in the stress regime the effect of intermediaries capital is most strongly pronounced at the short end of the term structure in contrast flows into and out of the illiquid bond market segment constitute a level effect as they are related to illiquidity premiums of all maturities

how much energy do building energy codes save evidence from california houses regulations governing the energy efficiency of new buildings have become a cornerstone of us environmental policy california enacted the first such codes in 1978 and has tightened them every few years since i evaluate the resulting energy savings three ways comparing energy used by houses constructed under different standards controlling for building and occupant characteristics examining how energy use varies with outdoor temperatures and comparing energy used by houses of different vintages in california to that same difference in other states all three approaches yield estimated energy savings significantly short of those projected when the regulations were enacted

fragmentation and the growth of local government an assumption of the post world war ii metropolitan reform movement was that fragmentation of metropolitan regions into multiple local governments was wasteful and inefficient increasing the cost and size of government more recently polycentrists have argued that the competition between multiple governments in metropolitan regions can in factreduce the growth in government by providing a competitive check on the excessive demands of local bureaucrats for more resources in this article i explore the effects of fragmentation on growth in the size of suburban municipal government budgets and in the number of services offered competition inherent in more fragmented metropolitan regions is shown to slow the expansion in local government expenditures and service levels

the diffusion of clean technologies a review with suggestions for future diffusion analysis abstract this article gives an overview of the literature on clean technology diffusion followed by suggestions for future analysis findings from diffusion analysis are presented in the form of 10 stylised facts helping the reader to see the forest for the trees the overall conclusion is that the diffusion of clean technology same as the diffusion of normal innovations is governed by endogenous mechanism epidemic learning and learning economies and by exogenous mechanisms policy is important for clean technology diffusion but other factors are important too the characteristics of the clean technology absorptive capacities of potential adopters and the age structure of capital it is often overlooked that companies have a choice they can choose between an end of pipe solution a process change adaptation and a change of process substitution this means that the diffusion and evolution of one clean technology will be at the expense of the diffusion of another clean technology something overlooked in studies on clean technology diffusion further research is needed on the influence of public policy on clean technology choice expectations about learning economies and prices adjustment costs network externalities and complementary innovations on clean technology adoption choices

estimating the net implicit price of energy efficient building codes on u s households abstract requiring energy efficiency building codes raises housing prices or the monthly rental equivalent but theoretically this effect might be fully offset by reductions in household energy expenditures whether there is a full compensating differential or how much households are paying implicitly is an empirical question this study estimates the net implicit price of energy efficient buildings codes iecc 2003 through iecc 2006 for american households using sample data from the american community survey 2007 a heteroskedastic seemingly unrelated estimation approach is used to estimate hedonic price house rent and energy expenditure models the value of energy efficiency building codes is capitalized into housing rents which are estimated to increase by 23 25 percent with the codes however the codes provide households a compensating differential of about a 6 47 percent reduction about 7 71 in monthly energy expenditure results indicate that the mean household net implicit price for these codes is about 140 87 per month in 2006 dollars 163 19 in 2013 dollars however this estimated price is shown to vary significantly by region energy type and the rent gradient

bureaucracy monopoly and competition a critical analysis of the budget maximizing model of bureaucracy niskanen has argued that if government bureaus act so as to maximize their budgets they will always produce an output greater than a private industry resulting in efficiency losses to society since the budget maximizing model relates to a number of intersecting areas of organizational analysis from several disciplines it is important to note the limitations of the model first niskanen s result is only true for a bureau which can exercise perfect price discrimination in its relationship with its financial sponsor where this is not the case the bureau may produce less than a private industry second further variation is introduced by examining the effects on a bureau of specialized resources public goods competition and low productivity a bureau which would otherwise produce an output in excess of the competitive level will when any of these factors are present produce an output closer to the competitive output these results may also have significant policy implications since major industrial countries are favoring policies to return some governmental activities to the private sector

do energy efficiency investments deliver evidence from the weatherization assistance program a growing number of policies and programs aim to increase investment in energy efficiency because conventional wisdom suggests that people fail to take up these investments even though they have positive private returns and generate environmental benefits many explanations for this energy efficiency gap have been put forward but there has been surprisingly little field testing of whether the conventional wisdom is correct this article reports on the results of an experimental evaluation of the nation s largest residential energy efficiency program the weatherization assistance program conducted on a sample of approximately 30 000 households in michigan the findings suggest that the upfront investment costs are about twice the actual energy savings furthermore the model projected savings are more than three times the actual savings although this might be attributed to the rebound effect when demand for energy end uses increases as a result of greater efficiency the article fails to find evidence of significantly higher indoor temperatures at weatherized homes even when accounting for the broader societal benefits derived from emissions reductions the costs still substantially outweigh the benefits the average rate of return is approximately 7 8 annually

municipal residency laws and local public budgets prior research has shown that residency laws increase the productivity of municipal employees which tends to reduce per unit operating cost however this gain in efficiency appears to have been lost when one considers that public employee groups tend to be high demanders who have a greater tendency to vote in local elections and to support expenditure increases bennett and orzechowski 1983 our results tend to provide additional evidence to support the findings of previous studies that public employee groups tend to exert a disproportionate impact on local budgetary decisions

perception of price when price information is costly evidence from residential electricity demand a bstract residential electricity consumption is an example of a good for which it is costly to determine marginal price since price changes with the quantity purchased according to multistep block rate schedules this paper investigates the effect of the price information problem on consumers price perceptions an alternative hypothesis of average price perception is tested against the marginal price postulate which assumes wellinformed consumers the model which includes a price perception variable allows the estimation of the price to which consumers actually respond the empirical results support the hypothesis that consumers respond to average price perceived from the electricity bill

energy tax credits and residential conservation investment evidence from panel data using panel data on individual tax returns and variation in state tax policy we measure the impact of government tax policies to encourage residential conservation investment on the probability of making these investments unlike previous work we account for unobserved heterogeneity in tastes for energy saving activities and its possible correlation with tax policy at the state level we find that controlling for unobserved heterogeneity is very important based on our preferred point estimate of the tax price coefficient a 10 percentage point change in the tax price for energy investment would lead to a 24 percent increase in the probability of making an investment

returns to residential energy efficiency and conservation measures a field experiment abstract residential energy conservation is a key component of contemporary energy and climate change policy in the us and elsewhere comparisons of the relative effectiveness of measures aimed at reducing residential energy consumption are made challenging however by the endogeneity of technology and energy use decisions in this paper we describe a novel small scale field experiment that uses randomized treatments to estimate the returns to three types of energy conservation measures in institutionally owned homes the results from the experiment indicate considerable reductions in natural gas consumption associated with the installation of attic insulation and the provision of incentives for conservation the results are supported by observations of ambient indoor temperature data which show that households receiving incentives significantly reduce their temperature settings especially when coupled with access to a programmable thermostat the study will ideally provide guidance for institutions and communities considering energy efficiency measures and for future researchers designing randomized experiments to study residential energy use

sensitivity of price elasticity of demand to aggregation unobserved heterogeneity price trends and price endogeneity evidence from u s data abstract price elasticity estimates of residential electricity demand vary widely across the energy economics and policy literature in this paper we seek to explain these findings using three nationwide datasets from the u s the american housing survey forms eia 861 and the residential energy consumption survey we examine the role of the sample period level of aggregation use of panel data use of instrumental variables and inclusion of housing characteristics and capital stock our findings suggest that price elasticities have remained relatively constant over time upon splitting our panel datasets into annual cross sections we do observe a negative relationship between price elasticities and the average price whether prices are rising or falling appears to have little effect on our estimates we also find that aggregating our data can result in both higher and lower price elasticity estimates depending on the dataset used and that controlling for unit level fixed effects with panel data generally results in more inelastic demand functions addressing the endogeneity of price and or measurement error in price with instrumental variables has a small but noticeable effect on the price elasticities finally controlling for housing characteristics and capital stock produces a lower price elasticity

government manipulation of constitutional level transaction costs a general theory of transaction cost augmentation and the growth of government transaction costs are pivotal to the ongoing political choice of where to draw the line between the private sector and the public sector contrary to the dominant paradigm politically important transaction costs are actively manipulated in the public sector by those who perceive potential personal gain from such action over time transaction cost changes so created by government decision makers may fundamentally redefine the role and scope of government to analyze the role of transaction costs in the growth or decline of government it is essential to distinguish transaction costs that are unavoidable realworld constraints from those that are contrived in the sense that they are created by government officials use or extension of their existing authority once discretionary power is vested in the government its officials have both the capacity and the incentive to restructure the transaction costs constraining the revision ofgovernrnental authority this restructuring of transaction costs may take two forms 1 altering people s perceptions of the costs and benefits of governmental authority in a given sphere an information cost problem 1 2 altering the cost of acting upon one s perceptions of the costs and benefits of collectivization in order to procure revision of the scope of governmental authority 2

budget maximizing governmental agencies an empirical test niskanen s theory of government budgeting involving powerful agencies interested in maximizing their budgets through bargaining with a weak poorly informed governmental sponsor has received wide recognition this paper presents the first direct empirical tests of niskanen s ideas one implication of niskanen s model of budgeting is that the demand for public services will appear to be elastic niskanen s model also implies restrictions on the elasticity of the derived demand for labor in the public sector neither set of predictions is supported by existing empirical research on government activity

patterns in residential gas and electricity consumption an econometric analysis in this article we investigate individual consumption data of natural gas and electricity using modified multiple regression techniques because a subset of households have zero gas consumption the purpose of the study is to ask two empirical questions 1 how can we quantify potential energy conservation from increasing gas availability 2 is it appropriate to estimate and compare electricity demands of gas users and nonusers by the same regression function we began our investigation based on the methodology of generalized tobit models our empirical results indicate that the probit equation for gas connection is exogenous to the amount of potential energy consumption to answer question 2 we obtain heteroscedasticity efficient estimates of the electricity demand equations by a nearest neighbor estimator to deal with heteroscedasticity of unknown form the prediction of energy conservation is that electricity demand could be reduced by 2 473 57 kilowatt hours a year per household if a gas connection

empirics on the long run effects of building energy codes in the housing market we study the effectiveness of building energy codes taking a long run perspective the focus is on regulation s impact on energy demand in both high and low quality residences in other words the diffusion and the entry of green buildings in the housing market we develop a measure for regulation intensity and apply this to a panel error correction regression model for energy requirements of a large sample of german apartment houses built between 1950 and 2005 we show that regulation is effective in saving energy in particular regulation pushes investors in the low quality housing market segment toward the technological frontier indirectly it also affects the high quality segment jel q41 r52