The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation

67 Pages Posted: 5 Jun 2017

See all articles by Tatyana Deryugina

Tatyana Deryugina

University of Illinois

Alexander MacKay

Harvard University - Business School (HBS)

Julian Reif

University of Illinois at Urbana-Champaign

Multiple version iconThere are 2 versions of this paper

Date Written: June 2017

Abstract

We study the dynamics of residential electricity demand by exploiting a natural experiment that produced large and long-lasting price changes in over 250 Illinois communities. Using a flexible difference-in-differences matching approach, we estimate that the price elasticity of demand grows from –0:09 in the first six months to –0:27 two years later. We also estimate a more sophisticated model in which usage is a function of past and future prices, and we find similar elasticity patterns. Our findings highlight the importance of accounting for consumption dynamics when evaluating energy policy.

Suggested Citation

Deryugina, Tatyana and MacKay, Alexander and Reif, Julian, The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation (June 2017). NBER Working Paper No. w23483. Available at SSRN: https://ssrn.com/abstract=2980591

Tatyana Deryugina (Contact Author)

University of Illinois ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://deryugina.com

Alexander MacKay

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://alexandermackay.org/

Julian Reif

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

HOME PAGE: http://www.julianreif.com

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