The long-run dynamics of electricity demand: Evidence from municipal aggregation

Tatyana Deryugina, Alexander MacKay, Julian Reif

Research output: Contribution to journalArticle

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-difference 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 find similar results with a dynamic model in which usage is a function of past and future prices. Our findings highlight the importance of accounting for consumption dynamics when evaluating energy policy.

Original languageEnglish (US)
Pages (from-to)86-114
Number of pages29
JournalAmerican Economic Journal: Applied Economics
Volume12
Issue number1
DOIs
StatePublished - Jan 1 2020

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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