NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Alexander MacKay

Morgan 242
Harvard Business School
Soldiers Field
Boston, MA 02163

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NBER Working Papers and Publications

June 2017The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation
with Tatyana Deryugina, Julian Reif: w23483
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.
 
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