Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171671
Authors: 
Filippini, Massimo
Hirl, Bettina
Masiero, Giuliano
Year of Publication: 
2016
Series/Report no.: 
Economics Working Paper Series 16/228
Abstract: 
Dynamic partial adjustment models of residential electricity demand account for the fact that households may not adjust electricity consumption immediately in response to changes in prices, income, and other relevant factors, because of behavioral habits or adjustment costs for the capital stock of appliances. However, forward-looking behavior is generally neglected. Expectations about future prices or consumption may have an impact on current decisions. In this paper we propose rational habit models for residential electricity demand and apply them to a panel of 48 US states between 1995 and 2011. We estimate lead consumption models using fixed effects, instrumental variables, and the GMM Blundell-Bond estimator. We find that expectations about future consumption significantly influence current consumption decisions, which suggests that households behave rationally when making electricity consumption decisions. This novel approach may improve our understanding of the dynamics of residential electricity demand and the evaluation of the effects of energy policies.
Subjects: 
Residential electricity
Partial adjustment models
Dynamic panel data models
Rational habits
JEL: 
D12
D84
D99
Q41
Q47
Q50
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.