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The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy-Efficiency Investments
The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy-Efficiency Investments
Rodolfo Sejas-Portillo
Mirko Moro
Till Stowasser
American Economic Journal: Applied Economics (Forthcoming)
Abstract
Using British data on over 7 million residential-property sales, we
find that the provision of simplified energy-efficiency (EE) information
leads to important market effects. UK legislation requires
the use of an energy label that shows an EE rating score (1–100)
mapped into arbitrary color-coded rating bands (A–G). Applying a
regression-discontinuity design, we document significant price discontinuities
at rating-band thresholds, providing evidence of heuristic
thinking in the market. Importantly, these price discontinuities
influence market behavior as sellers are more likely to make EE
investments if their property is just below a threshold. We discuss
policy considerations and avenues for future research.
