Working Paper: NBER ID: w26436
Authors: Erica Myers; Steven L. Puller; Jeremy D. West
Abstract: Mandatory disclosure policies are increasingly prevalent despite sparse evidence that they improve market outcomes. We study the effects of requiring home sellers to provide buyers with certified audits of residential energy efficiency. Using similar nearby homes as a comparison group, we find this requirement increases price capitalization of energy efficiency and encourages energy-saving residential investments. We present additional evidence characterizing the market failure as symmetrically incomplete information, which is ameliorated by government intervention. More generally, we formalize and provide empirical support for seller ignorance as a motivation for disclosure policies in markets with bilaterally incomplete information about quality.
Keywords: Energy Efficiency; Mandatory Disclosure; Housing Markets; Market Failure
JEL Codes: D83; K32; L15; Q48; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ECAD policy (I18) | capitalization of energy efficiency into home prices (Q41) |
| ECAD policy (I18) | investment in energy efficiency technologies (Q41) |
| capitalization of energy efficiency into home prices (Q41) | increased investment in energy efficiency technologies (Q41) |
| ECAD policy (I18) | better information flow in the housing market (R31) |
| weak relationship between energy efficiency and likelihood of disclosure (G14) | uninformed sellers about energy efficiency (Q41) |