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Natural Gas Demand in the European Household Sector

This paper analyzes the residential natural gas demand in 12 European countries using a dynamic demand model, which allows for country-specific short- and long-run elasticity estimates. The own-price and income elasticities tend to be very inelastic in the short run, albeit with much greater responsiveness in the longer run. Our results support very limited technological substitution possibilities between different energy carriers in the short run. Furthermore, the results suggested structural differences of residential natural gas demand across European countries and provide support for employing a heterogeneous estimator such as the shrinkage estimator.

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Energy Specializations: Natural Gas – Local Distribution; Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation

JEL Codes:
L95 - Gas Utilities; Pipelines; Water Utilities
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Natural gas, residential gas demand, Europe, OLS and Shrinkage

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-2

Published in Volume 29, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.