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.

Source

The Energy Journal

Type

Journal article

Book Title

Entity type

Access Statement

Open Access

License Rights

DOI

10.5547/01956574.39.2.pbur

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