American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy Efficiency Investments
American Economic Journal: Applied Economics
vol. 17,
no. 1, January 2025
(pp. 41–89)
Abstract
Using British data on over 7 million residential property sales, we find that the 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, indicating heuristic thinking in the market. 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.Citation
Sejas-Portillo, Rodolfo, Mirko Moro, and Till Stowasser. 2025. "The Simpler the Better? Threshold Effects of Energy Labels on Property Prices and Energy Efficiency Investments." American Economic Journal: Applied Economics, 17 (1): 41–89. DOI: 10.1257/app.20220329Additional Materials
JEL Classification
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- K32 Environmental, Energy, Health, and Safety Law
- Q48 Energy: Government Policy
- R31 Housing Supply and Markets
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