Why Has Wind Power Capacity Been Overinvested Under Uncertainty in China?
Journal Title: Review of Economics & Finance - Year 2016, Vol 6, Issue 1
Abstract
There are many uncertainties associated with the investment in wind power capacity in China. Nevertheless, wind capacity in China has been overinvested in the past several years and continues to be invested. This study attempts to explore the reasons why overinvestment has occurred under uncertainty. The analytical result implies that it would be optimal to invest more under uncertainty than in the corresponding risk-free world if an increase in the capital stock of wind capacity can significantly reduce the risk of wind abandonment. Since the majority of the investors are SOEs, it is very likely that the investors believe that higher wind capital stock can help to significantly reduce the risk, and thus have incentives to invest more under uncertainty. This belief is mainly backed up by the fact that SOEs play a special role in the economy. Therefore, overinvestment in wind capacity can hardly be avoided.
Authors and Affiliations
Xuemei Liu
Keywords
Related Articles
- EP ID EP259295
- DOI -
- Views 54
- Downloads 0
Collateral Risk and Demographic Discrimination in Mortgage Market Equilibria
Observations of significant differences in loan terms between demographically distinct groups of borrowers are often interpreted as evidence of ethnic, racial or gender discrimination by lenders. We consider, in stark co...
International Private Transfers and Optimal Tax Structure in Developing Economies
In this paper we examine the optimal tax structure for a developing economy with international inter-family transfers. Our analysis characterizes conditions to identify the main determinants of the design of both the com...
The Effect of Enterprise Zone-Related Tax Savings on Economic Development: A Generalized Propensity Score Approach
Since their onset in the early 1980s, enterprise zones (EZ) have been utilized for the revitalization of traditional downtown areas or old industrial and manufacturing areas that have undergone a protracted period of dec...
Remittances and the Redistributive Policy in Ghana: A Computable General Equilibrium Approach
This paper numerically explores the distributive policy for improving both welfare and income inequality with increased remittances in Ghana within a computable general equilibrium (CGE) framework. Our simulation results...
The US Monetary Base and Major World Equity Markets: An Empirical Investigation
This paper investigates the relationship between the US monetary base and the five largest equity indices of the world. The mainstay of the study is the vector autoregressive approach (VAR). Analyzing impulse response fu...