A New Look at Residential Electricity Demand Using Household Expenditure Data

40 Pages Posted: 25 Nov 2010 Last revised: 3 Mar 2014

See all articles by Harrison G. Fell

Harrison G. Fell

Resources for the Future

Shanjun Li

Cornell University - School of Applied Economics and Management

Anthony C. Paul

Resources for the Future

Date Written: September 19, 2011

Abstract

Many electricity demand estimates have been obtained based on the assumption that consumers optimize with respect to known marginal prices, but increasing empirical evidence suggests that consumers are more likely to respond to average prices. Under this assumption, this paper develops a new strategy based on Generalized Method of Moments to estimate household electricity demand. Our demand estimation approach uses publicly available expenditure data and utility-level consumption data from several major U.S. cities, complementing studies that use individual billing data which are richer yet often proprietary. We estimate the price elasticity near -0.50, which is at the upper end (in magnitude) among the estimates from previous studies. This could have important implications for policy analysis such as those on climate policies that may affect electricity prices.

Keywords: residential electricity demand, consumer expenditure survey, generalized method of moments

JEL Classification: C5, D12, Q4

Suggested Citation

Fell, Harrison G. and Li, Shanjun and Paul, Anthony C., A New Look at Residential Electricity Demand Using Household Expenditure Data (September 19, 2011). Available at SSRN: https://ssrn.com/abstract=1714626 or http://dx.doi.org/10.2139/ssrn.1714626

Harrison G. Fell (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5005 (Phone)

Shanjun Li

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Anthony C. Paul

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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