The effects of income on household energy consumption
Date
2018-06-01
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Abstract
The Philippines has one of the highest electricity prices among its neighbors in the
Southeast Asian region along with its high poverty rates. Energy has a huge importance to the
country, not just for the industrial sector, but also for households. Changes in its price carries a
huge impact.
This paper discusses the effect of the total income of Filipino households to their energy
consumption using the 2015 Family Income and Expenditures Survey (FIES). In particular, our
paper studies the usage of different energy sources such as electricity, LPG, kerosene, fuel wood,
charcoal, and other sources by different households with varying demographics and socio-
economic status. This paper utilizes ordinary least squares (OLS) regression, multiple probabilistic
(MProbit) regression, and multiple logistic (MLogit) regression models. Results show that there is
a positive relationship between the level of income of a household and the energy expenditure of
that household. This proves the assumption that energy behaves as a normal good. This means,
given a certain increase in the income of a consumer, there will be a corresponding increase in the
demand of that good, which in this case is energy. Moreover, the size of the household, the number
of appliances within the household, and total expenditures of the household are all positively
correlated with energy consumption. The findings also show positive relationship between
education of the household head and the household’s energy expenditure among all different kinds
of energy source. Marital status, wealth, and sex results show that there are difference in effects
depending on the energy source.
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Keywords
Energy, Income elasticity, educational attainment, wealth