Price and income elasticities of residential energy demand in Germany


Schulte, Isabella ; Heindl, Peter


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URL: https://ub-madoc.bib.uni-mannheim.de/41402
URN: urn:nbn:de:bsz:180-madoc-414020
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-052
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D12 , Q41 , Q54,
Keywords (English): Energy consumption , price elasticities , expenditure elasticities
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.

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Schulte, Isabella ; Heindl, Peter (2016) Price and income elasticities of residential energy demand in Germany. Open Access ZEW Discussion Papers Mannheim 16-052 [Working paper]
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