Estimation of residential electricity demand function in Seoul by correction for sample selection bias

Abstract

This paper attempts to estimate the residential electricity demand function in Seoul. To this end, we collected the data from a survey of households in Seoul and employed the bivariate model to rectify the undesirable impacts of non-response data. The results show that the size of family, the size of house, dummy for having a plasma display panel television, dummy for having an air conditioner, and the household's income have positive relationships with the residential electricity demand. On the other hand, electricity price contributes negatively to the residential electricity demand. In addition, the price and income elasticities were estimated as −0.2463 and 0.0593, respectively, implying that residential electricity demand in Seoul is price- and income-inelastic. Such useful information is expected to help policy-makers regulate the residential electricity supply and predict the effect of the price on the residential electricity demand in the future.