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Split Incentives in Emerging Countries

Author

Listed:
  • Hector H. Sandoval

    (BEBR/University of Florida)

  • Pedro I. Hancevic

    (CIDE/Universidad Panamericana)

Abstract

In this paper we provide empirical evidence of the energy-efficiency gap between home-owners and renters and quantify the magnitude of the split incentives problem in an emerging economy by studying Mexican households. Using micro-level data from the first National Survey on Energy Consumption in Private Homes (ENCEVI-2018) and a regression framework, we show that underinvestment problems occur in multiple categories of residential energy efficiency. Concretely, our results show that renters have significantly less insulation and energy-efficient equipment, that they tend to use some of their equipment more frequently, and that they pay higher utility bills than homeowners. In addition, renters are less aware of government programs that can reduce their energy expenditure and are also less likely to take advantage of them. Finally, a substantial reduction in carbon emissions could be achieved if renters were equally energy efficient as homeowners.

Suggested Citation

  • Hector H. Sandoval & Pedro I. Hancevic, 2023. "Split Incentives in Emerging Countries," Working Papers 242, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:242
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/242.pdf
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    References listed on IDEAS

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    1. Pedro I. Hancevic & Hector H. Sandoval, 2023. "Solar Panel Adoption in SMEs in Emerging Countries," Working Papers 222, Red Nacional de Investigadores en Economía (RedNIE).
    2. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 597-620, September.
    3. Myers, Erica, 2020. "Asymmetric information in residential rental markets: Implications for the energy efficiency gap," Journal of Public Economics, Elsevier, vol. 190(C).
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    5. Katrina Jessoe, Maya Papineau, and David Rapson, 2020. "Utilities Included: Split Incentives in Commercial Electricity Contracts," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5), pages 271-303.
    6. Melvin, Jesse, 2018. "The split incentives energy efficiency problem: Evidence of underinvestment by landlords," Energy Policy, Elsevier, vol. 115(C), pages 342-352.
    7. Chandra Kiran B. Krishnamurthy and Bengt Kriström, 2015. "How large is the Owner-Renter Divide in Energy Efficient Technology? Evidence from an OECD cross-section," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    8. Maruejols, Lucie & Young, Denise, 2011. "Split incentives and energy efficiency in Canadian multi-family dwellings," Energy Policy, Elsevier, vol. 39(6), pages 3655-3668, June.
    9. Petrov, Ivan & Ryan, Lisa, 2021. "The landlord-tenant problem and energy efficiency in the residential rental market," Energy Policy, Elsevier, vol. 157(C).
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    11. Charlier, Dorothée, 2015. "Energy efficiency investments in the context of split incentives among French households," Energy Policy, Elsevier, vol. 87(C), pages 465-479.
    12. Kenneth Gillingham, Matthew Harding, and David Rapson, 2012. "Split Incentives in Residential Energy Consumption," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    13. Rohan Best, Paul J. Burke, Shuhei Nishitateno, 2021. "Factors Affecting Renters' Electricity Use: More Than Split Incentives," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    14. Dorothée Charlier, 2015. "Energy-efficiency investments in the context of split incentives among French households," Post-Print hal-03062649, HAL.
    15. Souza, M.N.M., 2018. "Why are rented dwellings less energy-efficient? Evidence from a representative sample of the U.S. housing stock," Energy Policy, Elsevier, vol. 118(C), pages 149-159.
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    Cited by:

    1. Hancevic, Pedro I. & Sandoval, Hector H., 2023. "Solar panel adoption among Mexican small and medium-sized commercial and service businesses," Energy Economics, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Split incentives; principal-agent problem; energy efficiency; Mexico;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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