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US residential energy demand and energy efficiency: A stochastic demand frontier approach

  • Filippini, Massimo
  • Hunt, Lester C.

This paper estimates a US frontier residential aggregate energy demand function using panel data for 48 ‘states’ over the period 1995 to 2007 using stochastic frontier analysis (SFA). Utilizing an econometric energy demand model, the (in)efficiency of each state is modeled and it is argued that this represents a measure of the inefficient use of residential energy in each state (i.e. ‘waste energy’). This underlying efficiency for the US is therefore observed for each state as well as the relative efficiency across the states. Moreover, the analysis suggests that energy intensity is not necessarily a good indicator of energy efficiency, whereas by controlling for a range of economic and other factors, the measure of energy efficiency obtained via this approach is. This is a novel approach to model residential energy demand and efficiency and it is arguably particularly relevant given current US energy policy discussions related to energy efficiency.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 5 ()
Pages: 1484-1491

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1484-1491
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  2. Mehdi Farsi & Massimo Filippini & Michael Kuenzle, 2006. "Cost Efficiency in Regional Bus Companies: An Application of Alternative Stochastic Frontier Models," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 40(1), pages 95-118, January.
  3. Willam Greene, 2005. "Fixed and Random Effects in Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 23(1), pages 7-32, 01.
  4. Massimo Filippini & Lester C. Hunt, 2011. "Energy Demand and Energy Efficiency in the OECD Countries: A Stochastic Demand Frontier Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 59-80.
  5. Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
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  7. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
  8. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  9. Mehdi Farsi & Massimo Filippini & Michael Kuenzle, 2005. "Unobserved heterogeneity in stochastic cost frontier models: an application to Swiss nursing homes," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2127-2141.
  10. Zhou, P. & Ang, B.W., 2008. "Linear programming models for measuring economy-wide energy efficiency performance," Energy Policy, Elsevier, vol. 36(8), pages 2901-2906, August.
  11. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  12. Massimo Filippini & Lester Hunt, 2012. "US Residential Energy Demand and Energy Efficiency: A Stochastic Demand Frontier Approach," CEPE Working paper series 12-83, CEPE Center for Energy Policy and Economics, ETH Zurich.
  13. James M. Griffin & Craig T. Schulman, 2005. "Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
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  17. repec:cup:cbooks:9780521296762 is not listed on IDEAS
  18. Silvia Banfi & Massimo Filippini & Lester C. Hunt, 2003. "Fuel tourism in border regions," CEPE Working paper series 03-23, CEPE Center for Energy Policy and Economics, ETH Zurich.
  19. Baltagi, Badi H., 2006. "An Alternative Derivation Of Mundlak'S Fixed Effects Results Using System Estimation," Econometric Theory, Cambridge University Press, vol. 22(06), pages 1191-1194, December.
  20. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
  21. Buck, J. & Young, D., 2007. "The potential for energy efficiency gains in the Canadian commercial building sector: A stochastic frontier study," Energy, Elsevier, vol. 32(9), pages 1769-1780.
  22. Mehdi Farsi & Massimo Filippini & William Greene, 2005. "Efficiency Measurement in Network Industries: Application to the Swiss Railway Companies," Journal of Regulatory Economics, Springer, vol. 28(1), pages 69-90, 07.
  23. Olutomi I Adeyemi & Lester C Hunt, 2006. "Modelling OECD Industrial Energy Demand: Asymmetric Price Responses and Energy – Saving Technical Change," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 115, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  24. Ang, B.W., 2006. "Monitoring changes in economy-wide energy efficiency: From energy-GDP ratio to composite efficiency index," Energy Policy, Elsevier, vol. 34(5), pages 574-582, March.
  25. Huntington, Hillard G., 1994. "Been top down so long it looks like bottom up to me," Energy Policy, Elsevier, vol. 22(10), pages 833-839, October.
  26. Hunt, Lester C. & Judge, Guy & Ninomiya, Yasushi, 2003. "Underlying trends and seasonality in UK energy demand: a sectoral analysis," Energy Economics, Elsevier, vol. 25(1), pages 93-118, January.
  27. Lester C Hunt & Guy Judge & Yasushi Ninomiya, 2003. "Modelling Underlying Energy Demand Trends," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 105, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  28. Banfi, Silvia & Filippini, Massimo & Hunt, Lester C., 2005. "Fuel tourism in border regions: The case of Switzerland," Energy Economics, Elsevier, vol. 27(5), pages 689-707, September.
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