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Estimating Short and Long-Run Demand Elasticities: A Primer with Energy-Sector Applications

John T. Cuddington and Leila Dagher
Authors registered in the RePEc Author Service: John T. Cuddington and Leila Dagher ()

The Energy Journal, 2015, vol. Volume 36, issue Number 1

Abstract: Many empirical exercises estimating demand functions, whether in energy economics or other fields, are concerned with estimating dynamic effects of price and income changes over time. This paper first reviews a number of commonly used dynamic demand specifications to highlight the implausible a priori restrictions that they place on short and long-run elasticities. Such problems are easily avoided by adopting a general-to-specific modeling methodology. Second, it discusses functional forms and estimation issues for getting point estimates and associated standard errors for both short and long-run elasticities - key information that is missing from many published studies. Third, our proposed approach is illustrated using a dataset on Minnesota residential electricity demand.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2015
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