Unveiling the Energy Price Elasticity: Exploring the Impact of Price Shocks through Regression Discontinuity Design

Alejandro M. Danon, Cecilia S. Diaz-Campo, Jared Gars, Mariana Kestelman Borges and Lourdes Zulli

No 4639, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: Understanding how electricity demand responds to price shocks is a key question for a number of actors along the electricity supply chain as well as policy makers, albeit its estimation present several challenges. In this paper, we exploit a natural experiment to estimate the short-run impact of a price shock on residential electricity consumption. In particular, in January of 2021 the utility company adopted a new tariff schedule whereby the fixed component of the tariff was organized in four tiers based on households’ annual moving average consumption, which we exploit in a regression-discontinuity design. Despite the large average price increases at each fixed-cost cutoff, we find no significant effect of the tariff change on subsequent electricity consumption around the three thresholds. This lack of demand response to prices suggests that non-price instruments may be more effective at influencing residential electricity consumption.

JEL-codes: D12 L95 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023-11
New Economics Papers: this item is included in nep-ene and nep-reg
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