Price Elasticity Of Residential Demand Research Articles

The incidence of VAT reforms in electricity markets: Evidence from Belgium

In April 2014, the Belgian government reduced the VAT rate on the electricity price from 21% to 6% to support low-income families. In September 2015, the tax cut was repealed, and the VAT rate was reinstated to 21% in the context of a change of government. This paper investigates the impact of such temporary and (plausibly) exogenous VAT reform on the Belgian electricity market. We study the pass-through of the VAT reform to electricity prices and the effect of this (exogenous) price change on electricity demand. We estimate the VAT pass-through on residential electricity prices by a difference-in-differences method, using business electricity prices (not subject to VAT) as a control group. Our findings reveal that both the tax cut and the tax hike were entirely shifted to the electricity price (100% pass-through). To assess the impact of the VAT change on demand, we perform a counterfactual demand analysis of the electricity flowing monthly over the grid at the network operator level. Exploiting VAT and non-VAT related price variations, our results show a price elasticity of residential demand for electricity between -0.09 and -0.17. Interestingly, we also find that demand reacted quickly and symmetrically to the VAT cut and the subsequent VAT hike.

Price elasticity of water demand considering scarcity and attitudes

The effectiveness of price as a water conservation measure remains an open empirical issue and relevant policy question. We conduct a meta-regression analysis to single out location and community traits that boost or depress the price elasticity of residential demand. Our results reveal that water scarcity exerts significant influence on price elasticity. More specifically, if water scarcity is severe, household responsiveness to prices decreases, though this effect is attenuated in environmentally concerned communities.

The long-run price elasticity of residential demand for electricity: Results from a natural experiment

In one of two otherwise similar adjacent regions in a Canadian province, the price of electricity changed abruptly, substantially, and permanently. That natural experiment allows for a simple differences-in-differences calculation of the long-run price elasticity of residential demand for electricity. This analysis is of interest for two reasons. First, it is a rare circumstance when such a methodology can be used. Secondly, the magnitude of the elasticity estimate has substantial implications for utilities, regulators, and policymakers.

Price elasticity of residential demand for water: A meta‐analysis

Meta‐analysis is used to determine if there are factors that systematically affect price elasticity estimates in studies of residential water demand in the United States. An econometric model is estimated, using price elasticity estimates from previous studies as the dependent variable. Explanatory variables include functional form, cross‐sectional versus time series, water price specification, rate structure, location, season, and estimation technique. Inclusion of income, rainfall, and evapotranspiration are all found to influence the estimate of the price elasticity. Population density, household size, and temperature do not significantly influence the estimate of the price elasticity. Pricing structure and season are also found to significantly influence the estimate of the price elasticity.

Residential Demand for Water and the Pricing of Municipal Water Services

A large microdata sample is used to estimate the price elasticity of residential demand for water services. Data on delinquency of payments at the household level are employed to draw inferences about service termination. The issue of service termination permits a discussion of the public goods aspects of water and sewer service and of the appropriate pricing policy for municipal water services.