Identifying Free-riding in Home Renovation Programs Using Revealed Preference Data

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SummaryIdentifying free-ridership is significant to several issues relevant to program evaluation, including the calculation of net program benefits and assessments of political acceptability. Despite the potential of free-ridership to seriously undermine the economic efficiency of a program intervention, for instance to foster energy efficiency, the issue remains largely absent from contemporary environmental and energy policy discussions in Europe. One reason for this neglect is the inherent difficulty of assessing which households would have undertaken the energyconservation activity even without the program. This paper proposes a procedure to calculate the free-rider share using revealed preference data on home renovations from Germany's residential sector. We employ a discrete-choice model to analyze the effect of grants on renovation choices, the output from which is used to assess the extent of free-ridership under a subsidy program very akin to an implemented grants program in Germany. Our empirical results suggest only very moderate energy savings induced by the program, making free-riding a problem of outstanding importance.

Free-riding on tax credits for home insulation in France: An econometric assessment using panel data

“…Finally, as explained above (section 5), our results indicate that freeriding decreased over time, especially from 2009, which corresponds to an increase in the subsidy rates. This is consistent with Grösche et al (2013) who found that increasing the level of subsidy decreases the proportion of free-riding.…”

“…Using a discrete choice model on German cross-section data, Grösche and Vance (2009) designated potential free-riders as those whose estimated marginal willingness to pay for a particular retrofit option is higher than the observed investment cost without subsidy, and found a proportion of free-riding approaching 50%. Using the same database, Grösche, Schmidt, and Vance (2013) applied a more flexible discrete choice model to generate predicted choice probabilities for each retrofitting option. They found that, as the size of the subsidy increases, the share of program funds allocated to freeriders decreases even as the overall cost of the program increases.…”

Awareness and Utilization of Incentive Programs for Household Energy-Saving Renovations: Empirical Findings from Greece

“…We have indicated that individuals with an income lower than EUR 24,000 are more likely to have renovated their dwelling. This finding comes in contrast to previous research, which has revealed either a positive effect [22,23,[25][26][27] or no effect created by income [64][65][66]. However, this "opposite" result may have an explanation; the applicable provided public incentives take into account the level of annual family income, providing more significant financial motivations to lower-income homeowners.…”

Swedish House Owners’ Intentions Towards Renovations: Is there a Market for One-Stop-Shop?

“…High cost of investment for energy efficient renovations and the lack of financial resources from house owners' side is the most common preventing factor appearing in studies [31,35,[48][49][50][51][52]. There is a need for a significant upfront funding to overcome that barrier [26].…”