Does%20Energy%20Consumption%20Respond%20to%20Price%20Shocks%3F%20Evidence%20from%20a%20Regression%2DDiscontinuity%20Design

Working Papers

Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design


CODE: IDB-WP-234
AUTHOR(s): Bastos, Paulo , Castro, Lucio , Cristia, Julian , Scartascini, Carlos
PUBLISHED: January 2011
LANGUAGE: English
RELATED TOPICS: Microeconomics
DOWNLOAD FILE IN: English

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 non-linear and non-monotonic relationship between households’ accumulated consumption and unit prices, thus generating an exogenous source of variation in perceived prices, which is exploited in a regression-discontinuity design. The estimates reveal that a price increase in the utility bill received by consumers causes a substantial and prompt decline in gas consumption. Hence they suggest that policy interventions via the price mechanism, such as price caps and subsidies, are powerful instruments to influence residential energy utilization patterns, even within a short time span.

Related Research by JEL Codes:
(or click here to find research by JEL Codes)
  • The Devil is in the Details. Policy Design Lessons from Field Experiments in the Pampas
    Policy Brief
    IDB-PB-232 - October 2014

    There is growing evidence that individual responses to public policies are, to a large extent, mediated by the way the policies are framed, by people’s cognitive and computational capabilities, and by people’s subjective beliefs. For example, people may react to price changes but not to complicated schemes that rely on people’s computational abilities. Similarly, people may react better to simple ... (View publication)

  • Entry and Quality Choices in Child Care Markets
    Working Papers
    IDB-WP-225 - December 2010

    Many developing countries have adopted the market approach for expanding the supply of child care, but little is known about the economic behavior of independent providers. This paper draws on uniquely rich administrative data on child care centers and their inputs from São Paulo to examine the role of local household income in shaping the entry and quality choices of private suppliers. It documen ... (View publication)

  • Household Saving and Labor Informality: The Case of Chile
    Working Papers
    IDB-WP-581 - May 2015

    This paper compares the saving behavior of formal and informal workers and additionally provides a socioeconomic and financial characterization of informal workers in Chile. The paper uses the Financial Household Survey conducted by the Central Bank of Chile in 2007, 2008, 2009 and 2010, which covers between 1,740 and 2,533 urban households, performing both OLS and probit regressions. The cro ... (View publication)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.