A New Look at Residential Electricity Demand Using Household Expenditure Data
AbstractWe estimate residential electricity demand for different regions of the country, assuming that consumers respond to average electricity prices. We circumvent the need for individual billing information by developing a novel generalized method of moments approach that allows us to estimate demand based on household electricity expenditure data from the Consumer Expenditure Survey, which does not have quantity and price information. We find that price elasticity estimates vary across the four census regions—the South at –1.02 is the most price-elastic region and the Northeast at –0.82 is the least—and are essentially equivalent across income quartiles. In general, these price elasticity estimates are considerably larger in magnitude than those found in other studies using household-level data that assume that consumers respond to marginal prices. We also apply our elasticity estimates in a U.S. climate policy simulation to determine how these elasticity estimates alter consumption and price outcomes compared to the more conservative elasticity estimates commonly used in policy analysis.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-10-57.
Date of creation: 24 Nov 2010
Date of revision:
residential electricity demand; consumer expenditure survey; generalized method of moments;
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
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- Anna Alberini & Will Gans & Daniel Velez-Lopez, 2011.
"Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income,"
2011.01, Fondazione Eni Enrico Mattei.
- Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential consumption of gas and electricity in the U.S.: The role of prices and income," Energy Economics, Elsevier, vol. 33(5), pages 870-881, September.
- Anna Alberini & Gans Will & Daniel Lopez-Velez, 2010. "Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income," CEPE Working paper series 10-77, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Massimo Filippini & Anna Alberini, 2010.
"Response of Residential Electricity Demand to Price: The Effect of Measurement Error,"
CEPE Working paper series
10-75, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Alberini, Anna & Filippini, Massimo, 2011. "Response of residential electricity demand to price: The effect of measurement error," Energy Economics, Elsevier, vol. 33(5), pages 889-895, September.
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