Use of Regression Discontinuity Design for the Estimation of the Impact of National Policies on the Development of Biomass Energy in China

• Main Author: M-S. Dovì
• Format: Article
• Language: English
• Published: AIDIC Servizi S.r.l. 2016-08-01
• Series: Chemical Engineering Transactions
• Online Access: https://www.cetjournal.it/index.php/cet/article/view/3862

Regression Discontinuity Design (RDD) has become a popular econometric tool for evaluating impact and effectiveness of legislative measures. The main idea behind RDD is that discontinuities in the dependence of a set of data on a parameter across a cut-off value are basically due to the consequences of an event taking place at the cut-off. Thus, analyzing the time development of biomass energy in China, it is possible to estimate the impact of national policies by comparing differences across periods subject to different regulations. The relevant regression analysis introduces a dummy variable for each legislative bill considered: the corresponding coefficient in the ordinary least squares analysis provides the sought-after information on the effectiveness of the policy. Discontinuities in the rates of changes are also considered by introducing for each dummy variable two more terms representing a linear time evolution before and after the date of adoption of the new policy considered. Endogeneity problems are avoided by using the ratio of bioethanol production to corn and wheat production as a proxy variable for the overall biomass energy. Three milestone policies in the years 2002, 2007 and 2010 are considered. The estimated impacts and their statistical significance are evaluated using standard OLS techniques. The results show that RDD is indeed a powerful tool for an assessment of the effectiveness of new regulations in attaining their declared goals.