Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/144157 
Year of Publication: 
2016
Series/Report no.: 
ZEW Discussion Papers No. 16-052
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
We apply a quadratic expenditure system to estimate price and expenditure elasticities of residential energy demand (electricity and heating) in Germany. Using official expenditure data from 1993 to 2008, we estimate an expenditure elasticity for electricity of 0.3988 and of 0.4055 for space heating. The own price elasticity for electricity is -0.4310 and -0.5008 in the case of space heating. Disaggregation of households by expenditure and demographic composition reveals that the behavioural response to energy price changes is weaker (stronger) for low-income (top-income) households. There are considerable economies of scale in residential energy use but scale effects are not well approximated by the new OEDC equivalence scale. Real increases in energy prices show a regressive pattern of incidence, implying that the welfare consequences of direct energy taxation are larger for low income households. The application of zero-elasticities in assessments of welfare consequences of energy taxation strongly underestimates potential welfare effects. The increase in inequality is 22% smaller when compared to the application of rich and disaggregated behavioural response patterns as estimated in this paper.
Subjects: 
energy consumption
price elasticities
expenditure elasticities
JEL: 
D12
Q41
Q54
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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