Titelmasterformat durch Klicken bearbeiten WINPEC Seminar Waseda University
Titelmasterformat durch Klicken bearbeiten WINPEC Seminar Waseda University, Tokyo 16. 05. 2018 On the relevance of economic preferences, values, norms, and socio-demographics for electricity consumption Andreas Ziegler University of Kassel Germany
Titelmasterformat durch Klicken bearbeiten 1. Background
Titelmasterformat durch Klicken bearbeiten Energy production and demand • Generation of energy strongly contributes to total CO 2 emissions and thus climate change if fossil fuels are used or leads to nuclear waste (besides danger of horrible accidents) in case of nuclear energy • Besides switching to alternative energy sources (e. g. wind energy, solar thermal energy), another direction to limit problems is reduction of energy production and demand • Not only firms, but also households strongly contribute to total energy demand (e. g. household sector in Germany consumes more than 25% of total energy and also more than quarter of total electricity) → Individual reduction of electricity use is important direction of environmental and especially climate protection
Titelmasterformat durch Klickenconsumption bearbeiten Reduction of electricity • In addition to command control regulations (e. g. prohibition of traditional light bulbs in EU) and common price based policies (e. g. electricity taxes), voluntary programs encouraging reduction of electricity consumption are increasingly popular • Examples are specific public information campaigns for electricity conservation or also private initiatives such as German “electricity savings check” (“Stromspar-Check”, www. stromspar-check. de) or “electricity saving initiative” (“Stromsparinitiative”, www. die-stromsparinitiative. de) → However, necessary condition for effective programs is knowledge of individual factors that determine electricity use
Titelmasterformat durch. I Klicken bearbeiten Literature review • Previous studies have already empirically analyzed different groups of determinants for electricity use • Dwelling characteristics are very important: Dwelling size has strong positive effect on total electricity consumption (e. g. Chong, 2012, Costa and Khan, 2013) • Brounen et al. (2012) additionally reveal that dwelling size is positively correlated with electricity consumption per capita (in contrast, number of rooms has negative effect) • Another important group of variables are socio-demographics: Brounen et al. (2012) show that household income and age of household head are positively correlated with electricity consumption per capita
Titelmasterformat durch. IIKlicken bearbeiten Literature review • In contrast, Costa and Khan (2013) report negative effect of age of household head on total electricity use • Costa and Khan (2013) especially reveal strong effects of political identification and thus individual values, i. e. leftwing households consume less electricity • Recently, another group of variables, i. e. economic preferences, are considered as determinants for total energy expenditures • Volland (2017) shows that risk-taking preferences are positively correlated with energy expenditures, while trust has negative effect • Fischbacher et al. (2015) additionally reveal that future oriented homeowners have lower energy costs
Titelmasterformat durch Klicken Economic preferences I bearbeiten • Many studies show that economic preferences (especially risk and time preferences, trust, social preferences, positive and negative reciprocity, e. g. Falk et al. , 2016, 2018) generally play important role for individual behavior • Risk preferences affect behaviors and outcomes like buying stocks, housing ownership, or patterns of occupational choice (e. g. overview in Dohmen et al. , 2012) • Time preferences affect long-term outcomes like income or employment (e. g. Golsteyn et al. , 2014) • Trust plays important role for buying stocks (e. g. Guiso et al. , 2008) (and is also relevant for several macroeconomic variables like GDP growth, inflation, or volume of trade between countries, e. g. overview in Fehr, 2009)
Titelmasterformat durch Klicken Economic preferences II bearbeiten • Reciprocal preferences are relevant for employee concerns like employee representations (e. g. Jirhahn and Lange, 2015) • With respect to environmentally relevant behavior, Fischbacher et al. (2015) show that risk taking preferences are relevant for renovation decisions, while patience affects probability to live in energy efficient homes • Other studies examine importance of risk and time preferences for energy efficient or energy saving measures (e. g. Epper et al. , 2011, Newell and Siikamäki, 2015) • Kotchen and Moore (2007) show relevance of social preferences for participation in green electricity tariff
Titelmasterformat durch Klicken Contribution of study I bearbeiten • Empirical analysis of determinants of electricity use • Basis: Unique data from representative large web-based survey among more than 3700 German households → Part of research project “Energio”, funded by German Federal Ministry of Education and Research (co-operation partners in Germany: ifo Institute, University of Hamburg, Institute of Energy Economics at University of Cologne) • Econometric analysis includes all relevant variable groups considered so far to avoid distorted estimation results due to omitted variable biases • Analysis of dwelling characteristics, socio-demographics, and individual values (e. g. political identification, environmental preferences, religious affiliation)
Titelmasterformat durch Klicken Contribution of study II bearbeiten • Also psychological motives like feelings of warm glow and social norms from society and social environment are considered, which e. g. have strong effects on individual climate protection activities (e. g. Schwirplies and Ziegler, 2016) • Especially six key economic preferences (i. e. social and time preferences, trust, risk preferences, positive and negative reciprocity) are examined • Latter four factors are measured by experimentally validated questions • Additional inclusion of artefactual field experiments for measurement of social preferences (based on dictator game) and time preferences (i. e. patience)
Titelmasterformat durch Klicken bearbeiten 2. Data and variables
Titelmasterformat durch Klicken bearbeiten Data • Basis: Large-scale computer-based survey among 3705 German citizens • Survey was carried out in June and July 2016 by German market research company Psyma • Population: Citizens who are responsible for electricity bills and choice of electricity providers and tariffs (mostly heads of household) • Stratified sample in terms of age, gender, place of residence, religious affiliation • Questionnaires comprised several groups of questions including personal values and economic preferences, details about electricity consumption and costs, and choice experiment for different electricity tariffs
Titelmasterformat durch Klicken bearbeiten Dependent variable • It is difficult to collect reliable data on electricity consumption in surveys due to poor knowledge of households • Participants from panel of market research company Psyma were asked to pick up last annual electricity bill and to indicate annual overall electricity consumption (besides electricity costs, provider, and tariff) • Analysis of (logarithmized) total electricity consumption (in kilowatt hours) and equivalent electricity consumption (in line with equivalent income in official statistics, first adult in household is weighted with factor one, children with 0. 3, and other older household members with 0. 5) → OLS estimation of linear regression models, heteroskedasticity-robust z-statistics
Titelmasterformat durch Klicken bearbeiten Social and time preferences • Social and time preferences were identified by two incentivized artefactual field experiments • For both experiments respondents were informed that about 1% of them are randomly selected to be paid, respectively • Respondents were also informed that both experiments are completely independent • Furthermore, respondents were informed that winners are immediately notified after survey and that Euro amount is credited in bonus points on account as member of Psyma panel
Titelmasterformat durch Klicken bearbeiten Social preferences I • Experiment is based on standard dictator game, where generosity is costly • Respondents were informed that they can divide amount of 100 Euro with another randomly selected respondent in case that they belong to winner in lottery • Choice table:
Titelmasterformat durch Klicken bearbeiten Social preferences II • Frequencies of payment amounts (in Euro) for other respondents: • Variable “social preferences”: Amount allocated to other respondents divided by 100
Titelmasterformat durch. IKlicken bearbeiten Time preferences • Respondents were presented choice table with 12 decision situations and asked to make decision in every row • Choice table:
Titelmasterformat durch. IIKlicken bearbeiten Time preferences • Higher amount at which respondent switches to payment in seven months implies higher discount rate and thus lower patience • Variable “patience”: Minimum discount factor calculated as ratio between 80 Euro and value at which respondent chooses amount in seven months for first time • Distribution of discount factors:
Titelmasterformat durch Klicken bearbeiten Risk preferences • Based on survey question from German Socio-Economic Panel (SOEP) that was experimentally validated and shown to be reliable indicator for willingness to take risks • Respondents were asked about general willingness to take risks on five-stage scale (instead of eleven-stage scale in SOEP) with response categories “not at all willing to take risks”, “rather not willing to take risks”, “undecided”, “rather willing to take risks”, and “very willing to take risks”, for which integers from one to five are assigned • On basis of ordinal variable, dummy variable “risk preferences” takes value one for two highest values of ordered variable
Titelmasterformat Trust attitudesdurch Klicken bearbeiten • Variable is also based on experimentally validated survey questions from SOEP and thus on three statements: - “In general, one can trust people” - “Nowadays one cannot rely on anyone” - “When dealing with strangers, it is better to be careful before you trust them” • Respondents were asked how strongly they agree with statements on symmetric scale with five ordered response categories from “totally disagree” to “totally agree”, for which increasing integers from one to five for first item and decreasing integers from five to one for two latter items are assigned • Variable “trust”: Sum of values of three dummy variables on basis of two highest values of ordinal variables, respectively
Titelmasterformat durch Klicken bearbeiten Positive and negative reciprocity • Variables are in line with survey questions from SOEP and thus based on six statements: - “If someone does me a favor I am ready to return it” - “I am particularly trying to help someone who has helped me before” - “I am willing to pay costs to help someone who has helped me before” - “If I am faced with a great injustice, I will avenge myself at next opportunity” - “If someone puts me in a difficult position, I'll do same with him” - “If someone insults me, I will also be offensive to him” • Five ordered response categories vary again between “totally disagree” and “totally agree”, for which integers from one to five are assigned • Variables “positive reciprocity” and “negative reciprocity”: Sum of values of three dummy variables, respectively, on basis of two highest values of ordinal variables
Titelmasterformat durch Klicken bearbeiten Descriptive statistics
Titelmasterformat durch Klicken bearbeiten Political identification • Instead of simple one-dimensional indicator for right-wing or left-wing political identification, four statements are considered: - “I identify myself with conservatively oriented politics” - “I identify myself with liberally oriented politics” - “I identify myself with socially oriented politics” - “I identify myself with ecologically oriented politics” • Five ordered response categories vary again between “totally disagree” and “totally agree”, for which integers from one to five are assigned • Dummy variables “conservative”, “liberal”, “social”, and “ecological” on basis of two highest values of ordinal variables
Titelmasterformat Klicken bearbeiten Environmentaldurch preferences • Environmental preferences on basis of “NEP” is index on basis of six standardized statements from social and behavioral science - “Humans have the right to modify the natural environment to suit their needs” - “Humans are severely abusing the planet” - “Plants and animals have the same right to exist as humans” - “Nature is strong enough to cope with the impacts of modern industrial nations” - “Humans were meant to rule over the rest of nature” - “The balance of nature is very delicate and easily upset” • Five ordered response categories vary again between “totally disagree” and “totally agree”, for which integers from one to five are assigned • Variable “NEP”: Sum of values of six dummy variables on basis of two highest values of ordinal variables
Titelmasterformat Klicken bearbeiten Religious anddurch other social norms • Four dummy variables for religious affiliation: “Catholic”, “Protestant”, “other religious affiliation”, and “no religious affiliation” (base category) • Dummy variable “warm glow” for perceived good feelings from contribution to environmental protection (on basis of five ordered response categories, which vary again between “totally disagree” and “totally agree) • Similarly, dummy variable “expectation society” for perceived expectation of society to contribute to environmental protection • Similarly, dummy variable “contribution environment” for perceived contributions of friends, family, and colleagues to environmental protection
Titelmasterformat durch Klicken bearbeiten Descriptive statistics
Titelmasterformat durch Klicken bearbeiten Socio-demographics • “Age” (measured in years) • Dummy variable “female” if respondent is woman • Dummy variable “university” for high education • Dummy variable “Eastern Germany” if respondent lives in new Eastern federal states of Germany including Berlin • “Household size” is number of persons in household of respondent • Dummy variable “good health” if respondent describes own health as rather or very good on five-stage scale from “very bad” to “very good” • Dummy variable “high income” if household income of respondent is higher than median (i. e. at least 2500 Euro)
Titelmasterformat durch Klicken bearbeiten Descriptive statistics
Titelmasterformat durch Klicken bearbeiten Dwelling characteristics • Four dummy variables for housing status with respect to rental/ownership and apartment/house: “Rental apartment”, “rental house”, “own apartment”, and “own house” (base category) • “Log dwelling size” (measured in square meters) • Three dummy variables for type of domestic heating: “No heating with electricity”, “partly heating with electricity”, “completely heating with electricity” (base category) • Three dummy variables for type of water heating: “No water heating with electricity”, “partly water heating with electricity”, “completely water heating with electricity” (base category)
Titelmasterformat durch Klicken bearbeiten Descriptive statistics
Titelmasterformat durch Klicken bearbeiten 3. Econometric results
Titelmasterformat durch Klicken bearbeiten Summary • Patience and conservative and social policy identification have significantly negative effect on electricity use • Persons who are younger, are female, have university degree, are from Eastern Germany, and have good health consume significantly less electricity • High income is significantly positively correlated with total electricity consumption • Household size has significantly positive effect on total electricity use, but significantly negative effect on equivalent electricity use • Households with larger dwelling sizes, living in houses, and heating with electricity consume significantly more electricity
Titelmasterformat durch Klicken bearbeiten Economic preferences
Titelmasterformat durch Klicken bearbeiten Values and psychological motives
Titelmasterformat durch Klicken bearbeiten Socio-demographics
Titelmasterformat durch Klicken bearbeiten Dwelling characteristics
Titelmasterformat durch Klicken bearbeiten 4. Discussion and conclusions
Titelmasterformat durch Klicken Economic preferences I bearbeiten • Patient persons consume significantly less electricity, possibly due to more investments in energy efficient technologies, e. g. appliances • Other economic preferences have no significant effect on electricity use in Germany • In contrast, economic preferences are even more relevant for alternative individual behavior and attitudes • Individual change of electricity tariffs: While patience has significantly positive effect on general changes of electricity tariffs, social preferences and trust have significantly positive effect on specific change to green electricity tariffs
Titelmasterformat durch Klicken Economic preferences II bearbeiten • Environmental preferences: Social preferences and positive reciprocity are significantly positively correlated with NEP • Trust and negative reciprocity are significantly negatively correlated with NEP • To avoid omitted variable biases, results generally imply that economic preferences should be considered in econometric models for explanation of individual behavior and attitudes, especially when environmental preferences are included
Titelmasterformat durch Klicken bearbeiten Values and psychological motives • With exception of conservative and social policy identification, no variable has significant effect on electricity consumption • Especially environmentally related values (ecological policy identification, NEP, warm glow) and environmentally related norms (expectation of society, contribution of environment) are obviously not very relevant • Results imply that electricity consumption is not strongly associated with environmental protection in Germany, which is in contrast to other countries like USA • In contrast, ecological policy identification has e. g. significant effect on demand for green electricity tariffs
Titelmasterformat durch Klicken bearbeiten Socio-demographics • All socio-demographic variables have significant effects on electricity consumption • Higher electricity use of older persons with bad health could be due to longer stays at home • Lower electricity use of well-educated persons could be due to more knowledge about energy efficient technologies • Different estimated effects of household size on total and equivalent electricity consumption clearly reveal savings, e. g. due to less appliances (e. g. refrigerator) per capita in larger households
Titelmasterformat durch Klicken bearbeiten Dwelling characteristics • Estimation results for dwelling size suggest non-linear effects since dwelling size has no significant effect if it is included without logarithm • Estimation results reveal that ownership of dwellings only play minor role for electricity consumption • In contrast, living in houses leads to significantly more electricity use than living in apartments, possibly due to more appliances in houses (e. g. for own gardens) • Estimated positive effect of water heating with electricity on electricity consumption is higher than estimated effect of general heating with electricity
Titelmasterformat Implications durch Klicken bearbeiten • Empirical results suggest several directions e. g. for policy to decrease electricity consumption • For example, high importance of patience and education suggests information about economic gains in future for investments in energy efficient technologies • Significant effects of additional socio-demographic variables and of some dwelling characteristics suggest targeted information campaigns or other initiatives for specific population groups (e. g. orientation towards males or persons living in houses has higher potential for decrease of electricity use) • Methodologically, empirical analysis contributes to previous studies that transfer laboratory experiments to field
Titelmasterformat durch Klicken bearbeiten Direction for further research • Robustness checks with alternative model specifications • Theoretical foundation of estimation results • Analysis of relationship between general education and energy literacy with respect to electricity consumption • Comparison of estimation results with results in other countries beyond USA, e. g. Japan?
Titelmasterformat durch Klicken bearbeiten Thank you
- Slides: 45