Estimation of Japanese price elasticities of residential electricity demand, 1990-2007

- We present an empirical analysis of the Japanese residential demand for electricity.
- The estimated short-run (long-run) price elasticity of residential electricity consumption in Japan is -0.397 (-0.487).
- The price elasticity of Japanese residential electricity consumption is affected by income inequality and severe weather.

This paper estimates elasticities of Japanese residential price electricity from 1990 to 2007. The first difference generalized method of moment estimator is employed to avoid dynamic panel bias, which is not considered in most previous studies. The results show that while short-run elasticities are similar to those in previous studies, long-run elasticities are significantly lower in our study. We also find that the price elasticity of Japanese residential electricity consumption is notably affected by income inequality and severe weather. Based on these results, we provide some insights to tailor environmental taxation so as to effectively attain the Kyoto Protocol.