College of Agriculture & Natural Resources
Agricultural & Resource Economics

Seminar: Should Home Sellers be Required to Audit and Disclose Residential Energy Efficiency? - Erica Myers - UIUC

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When: 
Wednesday, Sep. 4, 3:30pm
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Where: 
3121 Symons Hall
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Presenter: 
Erica Myers - UIUC
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Abstract:

Mandatory information disclosure is a key regulatory instrument in major sectors including health care, education and finance despite scant empirical evidence supporting the economic efficiency of such requirements. Our study identifies a rare context of a government disclosure program that has demonstrable socially beneficial effects. Using similar nearby homes to form a counterfactual, we show that requiring homeowners to provide potential buyers with certified energy audits increases price capitalization of energy efficiency and leads to welfare-improving residential efficiency improvements. Moreover, we present evidence consistent with this setting having symmetrically incomplete information -- uninformed buyers and uninformed sellers -- as the likely market failure which is corrected by government intervention. More generally, we formalize and provide empirical support for seller ignorance as a motivation for mandatory information disclosure and justification for similar policies in settings where both buyers and sellers may imperfectly observe transacted product quality.

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