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Housing wealth and residential energy consumption

Accepted version
Peer-reviewed

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Type

Article

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Authors

Bao, HXH 
Li, SH 

Abstract

The housing wealth effect manifests as a positive relationship between consumption and perceived housing wealth. When the perceived value of a property rises, homeowners may feel more comfortable and secure about their wealth, causing them to spend more. This study adopts a behavioural approach to verify if this relationship holds true for residential energy consumption. An analytical framework is proposed to study the relationship between housing wealth and energy consumption at both the market and the individual level. We find evidence of significant association between housing wealth and energy consumption by using data between 1995 and 2016 from the UK. As the perception of housing value increases, UK residents tend to increase their energy consumption. Our models also consider psychological biases in energy consumption behaviours, such as market sentiment in the macro-level analysis and framing effect in the micro-level investigation. Our findings shed light on the behavioural aspects of housing wealth effect on residential energy consumption and demonstrate the potential of using behavioural interventions to encourage energy conservation activities. These findings are helpful in designing and implementing energy consumption policies that can strike a balance between social justice and economic efficiency.

Description

Keywords

Prospect theory, Mental accounting, Behavioural economics, Energy consumption, Housing wealth, Judgemental bias

Journal Title

Energy Policy

Conference Name

Journal ISSN

0301-4215
1873-6777

Volume Title

143

Publisher

Elsevier BV
Sponsorship
Economic and Social Research Council (ES/P004296/1)
Xu Yi Foundation for Financial Research (unknown)
ESRC and NSFC