Residential Energy Demand

Abstract

This article summarizes the literature on residential energy demand. The extensive literature on income and price elasticities shows significant variability. If these results can be summarized with a single number, the short-run income elasticity might be less than 0.4 and the corresponding price elasticity about 0.3. In the long run, the income elasticity might be (slightly lower than) 1 and the price elasticity lower, or about 0.7. Attitudes such as ‘feeling of obligation,’ ‘importance of conservation’, as well as ‘comfort and health concerns’ have been found to correlate with energy conservation behavior. Psychology-based studies show mixed results; in some studies, attitudinal variables are important, in others not. Empirical studies are yet to converge on the relationship between socioeconomic variables such as age and number of children. In some studies, the relationship is negative, in others nonsignificant; yet there are studies that find positive relationships. Mass information has limited success. Targeted information campaigns can be more potent. Demand for energy depends on a host of other factors, most importantly temperature. Insofar as the impact of demographic variables on energy consumption can be detached from income influence, empirics suggest that energy consumption varies over the life cycle and between ethnic groups and cultural practices. These empirical results are used to end this installment with a discussion about implications for energy policy.