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Price and income elasticities of residential electricity demand in Brazil and policy implications

Author

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  • Martins, Luís Oscar Silva
  • Amorim, Inara Rosa
  • Mendes, Vinícius de Araújo
  • Silva, Marcelo Santana
  • Freires, Francisco Gaudêncio Mendonça
  • Teles, Eduardo Oliveira
  • Torres, Ednildo Andrade

Abstract

The research objective was to estimate Brazil's residential electricity consumption behavior, given alterations in price and income. A balanced panel with monthly data was used for the 27 states of the country between 2004 and 2019, distributed into the five regions of Brazil. This approach enabled the calculation of price elasticity and income parameters, in the short and long terms, for both national and regional scenarios. They were used, as control variables, the average temperature, which was not used in previous research due to the use of a database with a higher level of aggregation, and the rainfall, that can be considered an important parameter in the Brazilian case where most of the electricity is obtained from hydroelectric generation, however, it has never been used in previous studies. The econometric model was estimated using the Generalized Method of Moments (GMM), version System - GMM (SY - GMM), to avoid dynamic bias of the panel and a serial correlation problem, which has not been considered in previous studies in Brazil. The results show that, although the short and long-term elasticities for the national scenario are similar to previous studies when analyzed regionally, the parameters proved to be quite different from previous research. Based on the results, adjustments were proposed for the Brazilian electricity price policy.

Suggested Citation

  • Martins, Luís Oscar Silva & Amorim, Inara Rosa & Mendes, Vinícius de Araújo & Silva, Marcelo Santana & Freires, Francisco Gaudêncio Mendonça & Teles, Eduardo Oliveira & Torres, Ednildo Andrade, 2021. "Price and income elasticities of residential electricity demand in Brazil and policy implications," Utilities Policy, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:juipol:v:71:y:2021:i:c:s0957178721000849
    DOI: 10.1016/j.jup.2021.101250
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    Cited by:

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    2. Xi Wang & Bisharat Hussain Chang & Emmanuel Uche & Qianli Zhao, 2024. "The asymmetric effect of income and price changes on the consumption expenditures: evidence from G7 countries using nonlinear bounds testing approach," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 35-53, January.
    3. Carlos Enrique Carrasco-Gutierrez & Philipp Ehrl, 2023. "Regional Estimates of Residential Electricity Demand in Brazil," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 465-476, January.
    4. Lu s Oscar Silva Martins & F bio Matos Fernandes & Alex A. B. Santos & Euclides Santos Bittencourt & Marcelo Santana Silva, 2023. "Dynamics of Industrial Electricity Demand in the State of Bahia (Brazil): Evolution of Price and Income and COVID-19 Implications," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 1-8, March.

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    More about this item

    Keywords

    Price elasticity; Income elasticity; SY GMM estimator; Residential electricity consumption;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D1 - Microeconomics - - Household Behavior
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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