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A Residential Energy Demand System for Spain

Abstract:
Sharp price fluctuations and increasing environmental and distributional concerns, among other issues, have led to a renewed academic interest in energy demand. In this paper we estimate, for the first time in Spain, an energy demand system with household microdata. In doing so, we tackle several econometric and data problems that are generally recognized to bias parameter estimates. This is obviously relevant, as obtaining correct price and income responses is essential if they may be used for assessing the economic consequences of hypothetical or real changes. With this objective, we combine data sources for a long time period and choose a demand system with flexible income and price responses. We also estimate the model in different sub-samples to capture varying responses to energy price changes by households living in rural, intermediate and urban areas. This constitutes a first attempt in the literature and it proved to be a very successful choice.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Residential energy demand, Spain, Energy prices, household microdata

DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-6


Published in Volume 27, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.