The price elasticity of electricity demand in the United States: A three-dimensional analysis
Date
2018
Authors
Burke, Paul J.
Abayasekara, Ashani
Journal Title
Journal ISSN
Volume Title
Publisher
International Association for Energy Economics
Abstract
In this paper we employ a dataset of three dimensions—state, sector, and year—to estimate the short- and long-run price elasticities of state-level electricity demand in the United States. Our sample covers the period 2003–2015. We contribute to the literature by employing instrumental variable estimation approaches, using the between estimator, and pursuing panel specifications that enable us to control for multiple dimensions of fixed effects. We conclude that state-level electricity demand is very price inelastic in the short run, with a same-year elasticity of –0.1. The long-run elasticity is near –1, larger than often believed. Among the sectors, it is industry that has the largest long-run price elasticity of demand. This appears to in part be due to electricity-intensive industrial activities clustering in low-price states.
Description
Keywords
electricity demand, price elasticity, United States, panel
Citation
Burke, Paul J. and Abayasekara, Ashani. 2018. “The price elasticity of electricity demand in the United States: A three-dimensional analysis.” The Energy Journal 39(2), 123–145.
Collections
Source
The Energy Journal
Type
Journal article
Book Title
Entity type
Access Statement
Open Access