Are home buyers inattentive? Evidence from capitalization of energy costs
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 M...
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| Format: | Article |
| Language: | English |
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American Economic Association
2019
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| Online Access: | View Fulltext in Publisher |
| Summary: | 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. © 2019 American Economic Association. |
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| ISBN: | 19457669 (ISSN) |
| DOI: | 10.1257/pol.20170481 |