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A New Look at Residential Electricity Demand Using Household Expenditure Data

Harrison Fell (), Shanjun Li () and Anthony Paul ()
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Anthony Paul: Resources for the Future

Discussion Papers from Resources For the Future

Abstract: We estimate residential electricity demand for different regions of the country, assuming that consumers respond to average electricity prices. We circumvent the need for individual billing information by developing a novel generalized method of moments approach that allows us to estimate demand based on household electricity expenditure data from the Consumer Expenditure Survey, which does not have quantity and price information. We find that price elasticity estimates vary across the four census regions—the South at –1.02 is the most price-elastic region and the Northeast at –0.82 is the least—and are essentially equivalent across income quartiles. In general, these price elasticity estimates are considerably larger in magnitude than those found in other studies using household-level data that assume that consumers respond to marginal prices. We also apply our elasticity estimates in a U.S. climate policy simulation to determine how these elasticity estimates alter consumption and price outcomes compared to the more conservative elasticity estimates commonly used in policy analysis.

Keywords: residential electricity demand; consumer expenditure survey; generalized method of moments (search for similar items in EconPapers)
JEL-codes: C5 D12 Q4 (search for similar items in EconPapers)
Date: 2010-11-24
New Economics Papers: this item is included in nep-ene
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Journal Article: A new look at residential electricity demand using household expenditure data (2014) Downloads
Working Paper: A New Look at Residential Electricity Demand Using Household Expenditure Data (2012) Downloads
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