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Housing wealth and residential energy consumption

Helen X.H. Bao and Steven Haotong Li

Energy Policy, 2020, vol. 143, issue C

Abstract: The housing wealth effect often manifests as a positive relationship between consumption and perceived housing wealth (e.g. the perceived value of houses). When the perceived value of a property rises, homeowners may feel more comfortable and secure about their wealth, causing them to spend more. This study adopts a behavioural approach to verify if this relationship holds true for residential energy consumption in the UK. While controlling for property characteristics and a large number of demographic, socioeconomic and energy-use behaviour variables, we identified a significant relationship between housing wealth and energy consumption. Our models also considered psychological biases in energy consumption behaviours, such as the framing effect. Our findings shed light on the behavioural aspects of housing wealth effect on residential energy consumption and demonstrate the potential to ‘nudge’ households towards energy conservation. Most importantly, we provide empirical evidence on the intriguing relationship among housing wealth, residential energy consumption and fuel poverty. The findings of this study are particularly helpful in designing and implementing energy consumption policies that can strike a balance between social justice and economic efficiency.

Keywords: Prospect theory; Mental accounting; Behavioural economics; Energy consumption; Housing wealth; Judgemental bias (search for similar items in EconPapers)
JEL-codes: Q40 Q50 R20 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.enpol.2020.111581

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