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Review of World Economics

, Volume 139, Issue 2, pp 324–347 | Cite as

The establishment of the danish windmill industry—Was it worthwhile?

  • Jørgen Drud HansenEmail author
  • Camilla Jensen
  • Erik Strøjer Madsen
Articles

Abstract

The paper examines the welfare effects of the Danish subsidies granted for the electricity production from wind power. This policy has induced a remarkable development of the Danish windmill industry resulting in a dominant position on the world market. The article demonstrates a strong learning-by-doing productivity growth in the Danish windmill industry and it analyzes the costs and benefits of this infant industry case. The costs consist of the efficiency loss from diverting electricity production from using fossil fuels to utilizing wind power. Benefits are the reductions in the environmental damage of using fossil fuels, however, the main benefits are related to the emergence of a new export sector. As the value of the windmill firms at the stock exchange by far exceeds that of the accumulated distorted losses in electricity production, this case demonstrates a successful infant industry strategy. JEL no. D2, L5, L6

Keywords

Learning-by-doing infant industry green subsidies 

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Copyright information

© Kiel Institute for World Economics 2003

Authors and Affiliations

  • Jørgen Drud Hansen
    • 1
    • 2
    • 3
    Email author
  • Camilla Jensen
    • 1
    • 2
    • 3
  • Erik Strøjer Madsen
    • 1
    • 2
    • 3
  1. 1.Eurofaculty Vilnius CentreVilnius UniversityVilniusLithuania
  2. 2.Copenhagen Business SchoolFrederiksbergDenmark
  3. 3.Aarhus School of BusinessAarhusDenmark

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