Can Rationing Affect Long Run Behavior? Evidence from Brazil

Abstract

Although there is some empirical evidence that economic phenomena may have multiple steady states, the feasibility of using temporary interventions to induce individuals to change behavior with sustainable effects is still contentious. I examine whether a temporary policy - electricity rationing - can affect long run household behavior. I look at evidence from an eight-month compulsory rationing imposed on Brazilian households' electricity use in 2001, exploiting differences in the policy's implementation across regions as a quasi-experiment to test its long run impact on households' electricity consumption patterns. I find that the rationing program led to a persistent reduction in electricity use of 14% even ten years later. This long run effect is robust to various empirical specifications. Unique household level microdata on appliance ownership and consumption habits suggest that the main source of persistence is changes in the utilization of electricity services, rather than the adoption of more energy-efficient appliances.

Keywords: electricity, rationing, persistence, energy efficiency

JEL Classification: D12, O13, Q41, Q48