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Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data

E. Raphael Branch

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-7
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Abstract:
This study provides information on the relationship between income and electricity consumption based on the Consumer Expenditure Interview Survey (CE) of the Bureau of Labor Statistics, U. S. Department of Labor. The income elasticity of short run demand for residential electricity is estimated using household panel data for homeowners. The CE is rich in its coverage of household characteristic data, housing characteristic data, and appliance inventory data. This makes it possible to model electricity demand across areas in the United States more comprehensively than has been done in a number of earlier studies. The results, obtained using a generalized least squares estimator (GLS), include an income elasticity of demand for electricity of 0.23 and a price elasticity of -0.20. The GLS estimator is used because OLS estimates are inefficient due to the correlation of the errors which arises from the use of panel data.



The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand

Dermot Gately and Hiliard G. Huntington

Year: 2002
Volume: Volume23
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No1-2
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Abstract:
This paper estimates the effects on energy and oil demand of changes in income and oil prices, for 96 of the world's largest countries, in per-capita terms. We examine three important issues: the asymmetric effects on demand of increases and decreases in oil prices; the asymmetric effects on demand of increases and decreases in income; and the different speeds of demand adjustment to changes in price and in income. Our main conclusions are the following: (1) OECD demand responds much more to increases in oil prices than to decreases; ignoring this asymmetric price response will bias downward the estimated response to income changes; (2) demand's response to income decreases in many Non-OECD countries is not necessarily symmetric to its response to income increases; ignoring this asymmetric income response will bias the estimated response to income changes; (3) the speed of demand adjustment is faster to changes in income than to changes in price; ignoring this difference will bias upward the estimated response to income changes. Using correctly specified equations for energy and oil demand, the longrun response in demand for income growth is about 1.0 for Non-OECD Oil Exporters, Income Growers and perhaps all Non-OECD countries, and about 0.55 For OECD countries. These estimates for developing countries are significantly higher than current estimates used by the US Department of Energy. Our estimates for the OECD countries are also higher than those estimated recently by Schmalensee-Stoker-Judson (1998) and Holtz-Eakin and Selden (1995), who ignore the (asymmetric) effects of prices on demand. Higher responses to income changes, of course, will increase projections of energy and oil demand, and of carbon dioxide emissions.



Gasoline Demand with Heterogeneity in Household Responses

Zia Wadud, Daniel J. Graham and Robert B. Noland

Year: 2010
Volume: Volume 31
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No1-3
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Abstract:
Fuel demand elasticities to determine consumer responses to tax increases or price shocks are typically based on aggregate data. The literature generally provides one elasticity estimate for each country, assuming similar response for all households. However, it is possible that different households can have different responses to the same stimuli depending on the household characteristics. Assuming a single elasticity for all households may fail to capture the detailed distributional effect on different socio-economic groups, which is often needed to fully understand the impact of fuel tax measures. This paper presents results from a household level gasoline demand model which accommodates variation in price and income elasticity with increasing income as well as for different socio-economic characteristics in the USA. We find substantial heterogeneity in price and income elasticities based on demographic groupings and income groups. Results of a distributional analysis for a gasoline tax are also presented using the heterogeneous responses.





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