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Ruhr Economic Papers #58


Peter Grösche, Colin Vance Ph.D.

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

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 utility 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 undertaking one of 16 renovation options. We use the model coefficients to derive 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.

ISBN: 978-3-86788-061-9

JEL-Klassifikation: C25 D12 Q4

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