A comparative analysis of energy demand and expenditures by minority and majority households within the context of a conditional demand system

Abstract

Analysis and evaluation of the impact that programs and policies have on energy consumption and expenditures are confounded by many intervening variables. A clear understanding of how these variables influence energy consumption patterns should be grounded in a rigorously developed framework. In this regard much is documented in the literature. However, an analysis of the comparative relationship between energy demand and variables which influence it among different socioeconomic groups has not been thoroughly explored with any theoretical rigor. It is proposed that differences in patterns of energy use between black, Hispanic, and majority households (where the household head is neither black nor Hispanic) are due to both structural and distribution differences. It is felt that the structural dissimilarities are primarily due to the dynamic nature in which energy consumption patterns evolve, with differences in changing housing patterns playing a significant role. For minorities, this implies a potential difference in the effect of policy and programs on economic welfare when compared to majority households.To test this hypothesis, separate conditional demand systems are estimated for majority, black, and Hispanic households. With the use of separate variance/covariance matrices, various parameter groups are tested for statistically significant differences.