You Can't Take it with You: Appliance Choices and the Energy Efficiency Gap

Abstract

The benefits of an investment in an energy efficient durable good depend on the life of the investment. If the expected length of ownership is mis-estimated, this will bias calculations of the benefits of energy efficiency, including estimates of the energy efficiency gap. This paper estimates how expected ownership length affects household appliance choices. I leverage the fact that some types of appliances are expected to convey (be included) with the sale of a house, while other appliances may or may not convey depending on local customs that vary at the state level. An appliance that conveys will be left behind when a homeowner moves, while an appliance that does not convey may be kept until the end of its useful life. I estimate the effect of an appliance conveying using a difference-in-differences across states and appliance types, allowing me to control for state-level trends using fixed effects. I find that consumers purchase less expensive refrigerators and clothes washers when those appliances convey. I show that accounting for whether an appliance conveys can substantially reduce or eliminate apparent undervaluation of energy efficiency benefits.