Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data

Abstract

This study provides information on the relationship between income and electricity consumption based on the Consumer Expenditure Interview Survey (CE) of the Bureau of Labor Statistics, U.S. Department of Labor. The income elasticity of short run demand for residential electricity is estimated using household panel data for homeowners. The CE is rich in its coverage of household characteristic data, housing characteristic data, and appliance inventory data. This makes it possible to model electricity demand across areas in the United States more comprehensively than has been done in a number of earlier studies. The results, obtained using a generalized least squares estimator (GLS), include an income elasticity of demand for electricity of 0.23 and a price elasticity of -0.20. The GLS estimator is used because OLS estimates are inefficient due to the correlation of the errors which arises from the use of panel data. 23 refs., 2 tabs.