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Does energy consumption respond to price shocks ? evidence from a regression-discontinuity design

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Listed:
  • Bastos, Paulo
  • Castro, Lucio
  • Cristia, Julian
  • Scartascini, Carlos

Abstract

This paper exploits unique features of a recently introduced tariff schedule for natural gas in Buenos Aires to estimate the short-run impact of price shocks on residential energy utilization. The schedule induces a nonlinear and non-monotonic relationship between households'accumulated consumption and unit prices, thus generating exogenous price variation, which is exploited in a regression-discontinuity design. The results reveal that a price increase causes a prompt and significant decline in gas consumption. They also indicate that consumers respond more to recent past bills than to expected prices, which argues against the assumption that consumers have perfect awareness of complex price schedules.

Suggested Citation

  • Bastos, Paulo & Castro, Lucio & Cristia, Julian & Scartascini, Carlos, 2014. "Does energy consumption respond to price shocks ? evidence from a regression-discontinuity design," Policy Research Working Paper Series 6785, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6785
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    Cited by:

    1. W. D. Gregori, 2014. "Fiscal Rules and Public Spending: Evidence from Italian Municipalities," Working Papers wp923, Dipartimento Scienze Economiche, Universita' di Bologna.
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    3. Gerard, Francois, 2013. "What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis," Discussion Papers dp-13-06, Resources For the Future.

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    More about this item

    Keywords

    Consumption; Climate Change Economics; Economic Theory&Research; Energy Production and Transportation; Markets and Market Access;
    All these keywords.

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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