Authors: Frondel, Manuel
Gerster, Andreas
Vance, Colin
Title: The power of mandatory quality disclosure
Other Titles: Evidence from the German housing market
Language (ISO): en
Abstract: Many countries have introduced Energy Performance Certificates (EPCs) to mitigate information asymmetry problems with respect to the thermal quality of houses. Using big data on real estate advertisements that cover large parts of the German housing market, this paper empirically investigates the consequences of a shift from a voluntary to a mandatory quality disclosure regime on the offer prices of houses. Illustrated by a stylized theoretical model, we test the following key hypothesis: Prices for houses whose owners would not voluntarily disclose their house’s energy consumption in real estate advertisements should decrease upon a shift to a mandatory disclosure scheme. Employing an instrumental variable approach to cope with the endogeneity of disclosure decisions, our analysis demonstrates the relative advantage of mandatory over voluntary disclosure rules.
Subject Headings: information asymmetry
environmental certification
mandatory disclosure
Subject Headings (RSWK): Asymmetrie der Information
Issue Date: 2016
Appears in Collections:Sonderforschungsbereich (SFB) 823

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