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Semi‐parametric Modelling of Investments in Heating Installations: The Case of the Dutch Glasshouse Industry
Author(s) -
Lansink Alfons Oude,
Pietola Kyosti
Publication year - 2005
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2005.00019.x
Subject(s) - investment (military) , economics , parametric statistics , marginal cost , heating system , natural resource economics , environmental science , microeconomics , engineering , mechanical engineering , statistics , mathematics , politics , political science , law
This paper applies a semi‐parametric approach to estimating a generalised model of investments in heating installations. The results suggest that marginal costs of investments in heating installations increase quickly at small investment levels, whereas the increase slows down at higher investment levels. Therefore, standard parametric adjustment cost models are probably biased such that they underestimate the costs of small investments and overestimate the costs of large investments. Results also show that investments in heating installations are very responsive to changes in energy prices. Therefore, an energy tax may be an effective instrument to encourage investments in new energy‐saving heating installations.