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The Establishment of the Danish Windmill Industry - Was It Worthwhile?

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The paper examines the welfare effects of the Danish subsidies towards the production of electricity from windpower. This policy has been a precondition for the 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 analyses the costs and benefits of this infant industry case. The costs consist of the efficiency loss from diverting production of electricity from using fossil fuels to utilizing windpower. In making up the benefits the environmental damage of using fossil fuels should in principle be taken into account. 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 loss in production of electricity, this case would appear to make up an example of a successful infant industry strategy.
Original languageEnglish
JournalReview of World Economics
Pages (from-to)324-347
Number of pages24
Publication statusPublished - 2003

    Research areas

  • Learning-by-doing, infant industries, Green subsidies

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