The income elasticity of household energy demand: a quantile regression analysis

July 10, 2017 | Journal Article

Authors: Jason Harold , John Cullinan , Seán Lyons
Journal of Applied Economics

This article examines variation in the income elasticity of household energy demand across the energy expenditure distribution using expenditure data from the five most recent Household Budget Surveys (HBSs) in Ireland: the 1987, 1994/1995, 1999/2000, 2004/2005 and 2009/2010 HBS. The analysis uses a two-stage instrumental variable quantile regression approach and is based on each HBS cross section, as well as the overall pooled observations. The estimated elasticities are compared across low- and high-energy-consumption scenarios and to a benchmark elasticity estimated using two-stage least squares. The results provide evidence that there is significant variation in the income elasticities across the energy expenditure distribution and that care must be taken when using the constant mean elasticity for policy purposes. More specifically, any examination of the future impact of a change in income support policy measures on energy consumption should recognize the substantial context-dependent variation in the income elasticity.

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  • Publication Details

    Journal Article

    ESRI Series Number: 201712
    Research Area: Energy and Environment
    Date of Publication: July 10, 2017
    Published Online: April 10, 2017
    Publisher: Routledge
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