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 65
- Downloads 0
Comparisons of Capital Input in OECD Agriculture, 1973-2011
This paper provides a farm sector comparison of relative levels of capital input for 17 OECD countries for the period 1973-2011, with an explicit distinction between land and depreciable assets. Methodologically, we adop...
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...
Job Search and Labor Market Outcomes of New Graduates in China: Using the Latest Available Survey Data
This is the first study that uses data collected after the new reform of the household registration system (hukou) on the topic of job search and labor market outcomes of new graduates in China. Data of recent years were...
Key Factors for Success of Social Enterprises in Italy: Analysis of Financial and Operating Performance
Assessing social performance is one of the greatest challenges for practitioners and researchers in social entrepreneurship. Even though social enterprises (SEs) have the main goal of achieving social purposes, they shou...
A “litmus test” of Deficit Sustainability: The Case of the Greek Budget Deficit
The paper applies three sustainability tests to the Greek budget deficit, which is known to be unsustainable, and can therefore be used to check the reliability of the three tests. Using three deficit definitions, i.e.,...