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The price elasticity of electricity demand in the United States: A three-dimensional analysis

Paul Burke () and Ashani Abayasekara

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

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 are able 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.

Keywords: electricity demand; price elasticity; United States; panel (search for similar items in EconPapers)
JEL-codes: Q41 Q43 L94 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2017-08
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Journal Article: The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional Analysis (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-50

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