The free electricity allowance and the Engel curve

In 1994 over 18 per cent of Irish households possessed a free electricity a llowance. This creates complications in using the 1994-95 Household Budget Survey to estimate an Engel curve for electricity expenditure. Ignoring the allowances leads to biased estimates of elasticities and distorts comparis ons between sectors. Examining the sub-populations with and without allowan ces results in conclusions leading to a substantial revision of the income elasticity for household electricity expenditure and to deductions about po ssible current and past welfare losses inherent in the free electricity sch eme.