TY - JOUR
T1 - Are home buyers inattentive? Evidence from capitalization of energy costs
AU - Myers, Erica
N1 - This work was also supported by the USDA National Institute of Food and Agriculture Hatch Project # ILLU-470-343-1005308.
* Department of Agricultural and Consumer Economics, University of Illinois, 1301 W. Gregory Drive, Urbana, IL 61801 (email: [email protected]). Matthew Notowidigdo was coeditor for this article. I am grateful to Severin Borenstein, Maximilian Auffhammer, Meredith Fowlie, and Catherine Wolfram for their invaluable advice and to Hunt Allcott, Judson Boomhower, Chris Bruegge, Benjamin Crost, Walter Graf, Koichiro Ito, Lala Ma, Rich Sweeney, and seminar participants at the EEE NBER Summer Institute, University of Chicago, and University of Illinois for helpful comments. Data support from the CoreLogic Academic Research Council (CLARC) Grant is gratefully acknowledged. I am also thankful for financial support from the Joseph L. Fisher Doctoral Dissertation Fellowship by Resources for the Future and from the Fisher Center for Real Estate & Urban Economics PhD Fellowship. This work was also supported by the USDA National Institute of Food and Agriculture Hatch Project # ILLU-470-343-1005308.
PY - 2019/5/1
Y1 - 2019/5/1
N2 - This paper explores whether home buyers are attentive to energy costs. The cost- effectiveness of market- based pollution policies crucially depends on whether consumers are attentive to energy costs when purchasing energy- using durables. I exploit energy-cost variation from fuel-price changes in Massachusetts where there is significant overlap in the geographic and age distributions of oil- heated and gas- heated homes. The results strongly reject that home buyers are unresponsive to energy costs under a wide range of consumption and discount-rate assumptions. Furthermore, my preferred specification is consistent with full capitalization of fuel expenditures at discount rates similar to mortgage interest rates.
AB - This paper explores whether home buyers are attentive to energy costs. The cost- effectiveness of market- based pollution policies crucially depends on whether consumers are attentive to energy costs when purchasing energy- using durables. I exploit energy-cost variation from fuel-price changes in Massachusetts where there is significant overlap in the geographic and age distributions of oil- heated and gas- heated homes. The results strongly reject that home buyers are unresponsive to energy costs under a wide range of consumption and discount-rate assumptions. Furthermore, my preferred specification is consistent with full capitalization of fuel expenditures at discount rates similar to mortgage interest rates.
UR - https://www.scopus.com/pages/publications/85066053557
UR - https://www.scopus.com/pages/publications/85066053557#tab=citedBy
U2 - 10.1257/pol.20170481
DO - 10.1257/pol.20170481
M3 - Article
AN - SCOPUS:85066053557
SN - 1945-7669
VL - 11
SP - 165
EP - 188
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
IS - 2
ER -