IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v68y2017is1p89-102.html
   My bibliography  Save this article

Explaining electricity demand and the role of energy and investment literacy on end-use efficiency of Swiss households

Author

Listed:
  • Blasch, Julia
  • Boogen, Nina
  • Filippini, Massimo
  • Kumar, Nilkanth

Abstract

This paper estimates the level of transient and persistent efficiency in the use of electricity in Swiss households using the newly developed generalized true random effects model (GTREM). An unbalanced panel dataset of 1994 Swiss households from 2010 to 2014 collected via a household survey is used to estimate an electricity demand frontier function. We further investigate whether energy and investment literacy have an influence on the household electricity consumption. The results show significant inefficiencies in the use of electricity among Swiss households, both transient (11%) and persistent (22%). We note that the high persistent inefficiency is indicative of structural problems faced by households and systematic behavioral shortcomings in residential electricity consumption. These results indicate a considerable potential for electricity savings and thus reaching the reduction targets defined by the Swiss federal council as part of the Energy Strategy 2050, wherein end-use efficiency improvement is one of the main pillars. The results support a positive role of energy and, in particular, investment literacy in reducing household electricity consumption. Policies targeting an improvement of these attributes could help to enhance efficiency in the use of energy within households.

Suggested Citation

  • Blasch, Julia & Boogen, Nina & Filippini, Massimo & Kumar, Nilkanth, 2017. "Explaining electricity demand and the role of energy and investment literacy on end-use efficiency of Swiss households," Energy Economics, Elsevier, vol. 68(S1), pages 89-102.
    • Handle: RePEc:eee:eneeco:v:68:y:2017:i:s1:p:89-102
    DOI: 10.1016/j.eneco.2017.12.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988317304243
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2017.12.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Anna Alberini & Massimo Filippini, 2015. "Transient and Persistent Energy Efficiency in the US Residential Sector: Evidence from Household-level Data," CER-ETH Economics working paper series 15/220, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. Roberto Colombi & Subal Kumbhakar & Gianmaria Martini & Giorgio Vittadini, 2014. "Closed-skew normality in stochastic frontiers with individual effects and long/short-run efficiency," Journal of Productivity Analysis, Springer, vol. 42(2), pages 123-136, October.
    3. Lucas Bretschger & Alexandra Vinogradova, 2015. "Equitable and effective climate policy: Integrating less developed countries into a global climate agreement," International Economics and Economic Policy, Springer, vol. 12(4), pages 437-467, October.
    4. Brent, Daniel A. & Ward, Michael B., 2018. "Energy efficiency and financial literacy," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 181-216.
    5. 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.
    6. Scott, S., 1997. "Household energy efficiency in Ireland: A replication study of ownership of energy saving items," Energy Economics, Elsevier, vol. 19(2), pages 187-208, May.
    7. Massimo Filippini & William Greene, 2016. "Persistent and transient productive inefficiency: a maximum simulated likelihood approach," Journal of Productivity Analysis, Springer, vol. 45(2), pages 187-196, April.
    8. Smulders, Sjak & Tsur, Yacov & Zemel, Amos, 2012. "Announcing climate policy: Can a green paradox arise without scarcity?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 364-376.
    9. Filippini, Massimo & Hunt, Lester C., 2012. "US residential energy demand and energy efficiency: A stochastic demand frontier approach," Energy Economics, Elsevier, vol. 34(5), pages 1484-1491.
    10. Hunt Allcott & Dmitry Taubinsky, 2015. "Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market," American Economic Review, American Economic Association, vol. 105(8), pages 2501-2538, August.
    11. Filippini, Massimo & Hunt, Lester C., 2015. "Measurement of energy efficiency based on economic foundations," Energy Economics, Elsevier, vol. 52(S1), pages 5-16.
    12. 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.
    13. Broberg, Thomas & Kazukauskas, Andrius, 2015. "Inefficiencies in Residential Use of Energy — A Critical Overview of Literature and Energy Efficiency Policies in the EU," International Review of Environmental and Resource Economics, now publishers, vol. 8(2), pages 225-279, July.
    14. James M. Sallee, 2014. "Rational Inattention and Energy Efficiency," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 781-820.
    15. Fu, Qiang & Lu, Jingfeng & Lu, Yuanzhu, 2012. "Incentivizing R&D: Prize or subsidies?," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 67-79.
    16. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    17. Frederiks, Elisha R. & Stenner, Karen & Hobman, Elizabeth V., 2015. "Household energy use: Applying behavioural economics to understand consumer decision-making and behaviour," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1385-1394.
    18. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 3-28, Winter.
    19. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
    20. Tim Coelli & Sergio Perelman & Elliot Romano, 1999. "Accounting for Environmental Influences in Stochastic Frontier Models: With Application to International Airlines," Journal of Productivity Analysis, Springer, vol. 11(3), pages 251-273, June.
    21. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    22. Scott Barrett, 2006. "Climate Treaties and "Breakthrough" Technologies," American Economic Review, American Economic Association, vol. 96(2), pages 22-25, May.
    23. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-764, May.
    24. Bretschger, Lucas & Lechthaler, Filippo & Rausch, Sebastian & Zhang, Lin, 2017. "Knowledge diffusion, endogenous growth, and the costs of global climate policy," European Economic Review, Elsevier, vol. 93(C), pages 47-72.
    25. Bård Harstad, 2016. "The Dynamics of Climate Agreements," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 719-752.
    26. Martin, Ralf & Muûls, Mirabelle & de Preux, Laure B. & Wagner, Ulrich J., 2014. "On the empirical content of carbon leakage criteria in the EU Emissions Trading Scheme," Ecological Economics, Elsevier, vol. 105(C), pages 78-88.
    27. Michael Hoel, 1992. "International environment conventions: The case of uniform reductions of emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 141-159, March.
    28. Carraro, Carlo & Siniscalco, Domenico, 1993. "Strategies for the international protection of the environment," Journal of Public Economics, Elsevier, vol. 52(3), pages 309-328, October.
    29. El-Sayed, Abeer & Rubio, Santiago J., 2014. "Sharing R&D investments in cleaner technologies to mitigate climate change," Resource and Energy Economics, Elsevier, vol. 38(C), pages 168-180.
    30. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    31. Santiago J. Rubio, 2017. "Sharing R&D investments in breakthrough technologies to control climate change," Oxford Economic Papers, Oxford University Press, vol. 69(2), pages 496-521.
    32. Flaig, Gebhard, 1990. "Household production and the short- and long-run demand for electricity," Energy Economics, Elsevier, vol. 12(2), pages 116-121, April.
    33. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    34. Gersbach, Hans & Winkler, Ralph, 2011. "International emission permit markets with refunding," European Economic Review, Elsevier, vol. 55(6), pages 759-773, August.
    35. 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.
    36. Vincenzo Denicolo & Luigi A. Franzoni, 2010. "On the Winner-Take-All Principle in Innovation Races," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1133-1158, September.
    37. DeWaters, Jan E. & Powers, Susan E., 2011. "Energy literacy of secondary students in New York State (USA): A measure of knowledge, affect, and behavior," Energy Policy, Elsevier, vol. 39(3), pages 1699-1710, March.
    38. Asheim, Geir B. & Froyn, Camilla Bretteville & Hovi, Jon & Menz, Fredric C., 2006. "Regional versus global cooperation for climate control," Journal of Environmental Economics and Management, Elsevier, vol. 51(1), pages 93-109, January.
    39. Hong, Fuhai & Karp, Larry, 2012. "International Environmental Agreements with mixed strategies and investment," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 685-697.
    40. Michael Finus & Stefan Maus, 2008. "Modesty May Pay!," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 801-826, October.
    41. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 597-620, September.
    42. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    43. Willam Greene, 2005. "Fixed and Random Effects in Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 23(1), pages 7-32, January.
    44. Boogen, Nina, 2017. "Estimating the potential for electricity savings in households," Energy Economics, Elsevier, vol. 63(C), pages 288-300.
    45. Mills, Bradford & Schleich, Joachim, 2012. "Residential energy-efficient technology adoption, energy conservation, knowledge, and attitudes: An analysis of European countries," Energy Policy, Elsevier, vol. 49(C), pages 616-628.
    46. Di Maria, Corrado & Smulders, Sjak & van der Werf, Edwin, 2012. "Absolute abundance and relative scarcity: Environmental policy with implementation lags," Ecological Economics, Elsevier, vol. 74(C), pages 104-119.
    47. Zografakis, Nikolaos & Menegaki, Angeliki N. & Tsagarakis, Konstantinos P., 2008. "Effective education for energy efficiency," Energy Policy, Elsevier, vol. 36(8), pages 3216-3222, August.
    48. Marie-Catherine Riekhof & Johannes Bröcker, 2017. "Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-34, May.
    49. Hans Gersbach & Quirin Oberpriller, 2012. "Rules vs. Targets: Climate Treaties under Uncertainty," CER-ETH Economics working paper series 12/159, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    50. Efthymios G. Tsionas & Subal C. Kumbhakar, 2014. "FIRM HETEROGENEITY, PERSISTENT AND TRANSIENT TECHNICAL INEFFICIENCY: A GENERALIZED TRUE RANDOM‐EFFECTS model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(1), pages 110-132, January.
    51. Goeschl, Timo & Perino, Grischa, 2015. "The Climate Policy Hold-Up: Green Technologies,Intellectual Property Rights, and the Abatement Incentives of International Agreements," Working Papers 0591, University of Heidelberg, Department of Economics.
    52. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
    53. 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.
    54. Filippini, Massimo & Hunt, Lester C. & Zorić, Jelena, 2014. "Impact of energy policy instruments on the estimated level of underlying energy efficiency in the EU residential sector," Energy Policy, Elsevier, vol. 69(C), pages 73-81.
    55. Brounen, Dirk & Kok, Nils & Quigley, John M., 2013. "Energy literacy, awareness, and conservation behavior of residential households," Energy Economics, Elsevier, vol. 38(C), pages 42-50.
    56. Todd Gerarden & Richard G. Newell & Robert N. Stavins, 2015. "Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence," American Economic Review, American Economic Association, vol. 105(5), pages 183-186, May.
    57. 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.
    58. Bretschger, Lucas, 2013. "Climate policy and equity principles: fair burden sharing in a dynamic world," Environment and Development Economics, Cambridge University Press, vol. 18(5), pages 517-536, October.
    59. William Nordhaus, 2015. "Climate Clubs: Overcoming Free-Riding in International Climate Policy," American Economic Review, American Economic Association, vol. 105(4), pages 1339-1370, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hans Gersbach & Marie-Catherine Riekhof, 2022. "Technology Treaties And Climate Change," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-42, May.
    2. Marin, Giovanni & Palma, Alessandro, 2017. "Technology invention and adoption in residential energy consumption," Energy Economics, Elsevier, vol. 66(C), pages 85-98.
    3. Blasch, Julia & Filippini, Massimo & Kumar, Nilkanth, 2019. "Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances," Resource and Energy Economics, Elsevier, vol. 56(C), pages 39-58.
    4. Dolšak, Janez & Hrovatin, Nevenka & Zorić, Jelena, 2022. "Estimating the efficiency in overall energy consumption: Evidence from Slovenian household-level data," Energy Economics, Elsevier, vol. 114(C).
    5. Mark A. Andor & David H. Bernstein & Stephan Sommer, 2021. "Determining the efficiency of residential electricity consumption," Empirical Economics, Springer, vol. 60(6), pages 2897-2923, June.
    6. Filippini, Massimo & Hunt, Lester C., 2015. "Measurement of energy efficiency based on economic foundations," Energy Economics, Elsevier, vol. 52(S1), pages 5-16.
    7. Victor von Loessl & Heike Wetzel, 2019. "Revenue decoupling and energy consumption: Empirical evidence from the U.S. electric utilities sector," MAGKS Papers on Economics 201918, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Huaping Sun & Bless Kofi Edziah & Xiaoqian Song & Anthony Kwaku Kporsu & Farhad Taghizadeh-Hesary, 2020. "Estimating Persistent and Transient Energy Efficiency in Belt and Road Countries: A Stochastic Frontier Analysis," Energies, MDPI, vol. 13(15), pages 1-19, July.
    9. Lundgren, Tommy & Marklund, Per-Olov & Zhang, Shanshan, 2016. "Industrial energy demand and energy efficiency – Evidence from Sweden," Resource and Energy Economics, Elsevier, vol. 43(C), pages 130-152.
    10. Massimo Filippini & Lester C. Hunt, 2013. "'Underlying Energy Efficiency' in the US," CER-ETH Economics working paper series 13/181, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    11. Giovanni Marin & Alessandro Palma, 2015. "Technology invention and diffusion in residential energy consumption. A stochastic frontier approach," IEFE Working Papers 81, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    12. Lester C. Hunt & Paraskevas Kipouros, 2023. "Energy Demand and Energy Efficiency in Developing Countries," Energies, MDPI, vol. 16(3), pages 1-26, January.
    13. Boogen, Nina, 2017. "Estimating the potential for electricity savings in households," Energy Economics, Elsevier, vol. 63(C), pages 288-300.
    14. Li, Hong-Zhou & Kopsakangas-Savolainen, Maria & Yan, Ming-Zhe & Wang, Jian-Lin & Xie, Bai-Chen, 2019. "Which provincial administrative regions in China should reduce their coal consumption? An environmental energy input requirement function based analysis," Energy Policy, Elsevier, vol. 127(C), pages 51-63.
    15. Amjadi, Golnaz & Lundgren, Tommy, 2022. "Is industrial energy inefficiency transient or persistent? Evidence from Swedish manufacturing," Applied Energy, Elsevier, vol. 309(C).
    16. Sareh Vosooghi & Maria Arvaniti & Frederick Van Der Ploeg, 2022. "Self-enforcing climate coalitions for farsighted countries: integrated analysis of heterogeneous countries," Economics Series Working Papers 971, University of Oxford, Department of Economics.
    17. Martini, Gianmaria & Scotti, Davide & Viola, Domenico & Vittadini, Giorgio, 2020. "Persistent and temporary inefficiency in airport cost function: An application to Italy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 132(C), pages 999-1019.
    18. Wang, Xia & Ding, Chao & Zhou, Mao & Cai, Weiguang & Ma, Xianrui & Yuan, Jiachen, 2023. "Assessment of space heating consumption efficiency based on a household survey in the hot summer and cold winter climate zone in China," Energy, Elsevier, vol. 274(C).
    19. Roberto Colombi & Gianmaria Martini & Giorgio Vittadini, 2017. "Determinants of transient and persistent hospital efficiency: The case of Italy," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 5-22, September.
    20. Lv, Yulan & Chen, Wei & Cheng, Jianquan, 2020. "Effects of urbanization on energy efficiency in China: New evidence from short run and long run efficiency models," Energy Policy, Elsevier, vol. 147(C).

    More about this item

    Keywords

    Stochastic frontier analysis; Transient and persistent efficiency; Residential electricity demand; Energy literacy; Investment literacy;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:68:y:2017:i:s1:p:89-102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.