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

66 Pages Posted: 20 Nov 2018

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: October 26, 2018

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.

JEL Classification: Q41, Q48, D12

Suggested Citation

Deryugina, Tatyana and MacKay, Alexander and Reif, Julian, The Long-Run Dynamics of Electricity Demand: Evidence From Municipal Aggregation (October 26, 2018). Available at SSRN: https://ssrn.com/abstract=3274708 or http://dx.doi.org/10.2139/ssrn.3274708

Tatyana Deryugina

University of Illinois ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://deryugina.com

Alexander MacKay (Contact Author)

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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