Price and income elasticities of residential energy demand in Germany

Isabella Schulte and Peter Heindl

No 16-052, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We apply a quadratic expenditure system to estimate price and expenditure elasticities of residential energy demand (electricity and heating) in Germany. Using official expenditure data from 1993 to 2008, we estimate an expenditure elasticity for electricity of 0.3988 and of 0.4055 for space heating. The own price elasticity for electricity is -0.4310 and -0.5008 in the case of space heating. Disaggregation of households by expenditure and demographic composition reveals that the behavioural response to energy price changes is weaker (stronger) for low-income (top-income) households. There are considerable economies of scale in residential energy use but scale effects are not well approximated by the new OEDC equivalence scale. Real increases in energy prices show a regressive pattern of incidence, implying that the welfare consequences of direct energy taxation are larger for low income households. The application of zero-elasticities in assessments of welfare consequences of energy taxation strongly underestimates potential welfare effects. The increase in inequality is 22% smaller when compared to the application of rich and disaggregated behavioural response patterns as estimated in this paper.

Keywords: energy consumption; price elasticities; expenditure elasticities (search for similar items in EconPapers)
JEL-codes: D12 Q41 Q54 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ene and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/144157/1/863154018.pdf (application/pdf)

Related works:
Journal Article: Price and income elasticities of residential energy demand in Germany (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:16052

Access Statistics for this paper

More papers in ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().