Facebook LinkedIn Twitter
Shop

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

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

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.

Download Executive Summary Purchase ( $25 )

Energy Specializations: Electricity; Electricity – Markets and Prices ; Electricity – Other; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
L94 - Electric Utilities
D42 - Market Structure, Pricing, and Design: Monopoly
Q49 - Energy: Other
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

DOI: 10.5547/01956574.36.1.7

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.


Published in Volume 36, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.