QUEBEC RESIDENTIAL ELECTRICITY DEMAND - A MICROECONOMETRIC APPROACH

In this paper we use a micro approach to model Quebec residential dema nd for electricity. The model incorporates a joint continuous/discrete decision framework which allows for interrelationships between decisi ons on electricity-related durable holdings and those on usage. In the spirit of recent studies, which used a continuous/discrete framework, the model parameters are estimated using a two-stage approach. At the first stage the decisions regarding space and water heating systems a re modelled with a very flexible Multinomial Probit (MNP) framework. T hen, at the second stage, the demand for electricity conditional on th e chosen heating system is estimated using ordinary least squares, and a correction is applied in order to eliminate a potential estimation bias. The estimated short-run and long-run price and income elasticiti es have the correct signs and are rather small, as is expected under s uch circumstances.