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Does energy consumption respond to price shocks ? evidence from a regression-discontinuity design, Volume 1
Author:Bastos, Paulo; Castro, Lucio; Cristia, Julian; Scartascini, Carlos; Country:World;
Date Stored:2014/02/25Document Date:2014/02/01
Document Type:Policy Research Working PaperSubTopics:Energy Production and Transportation; Climate Change Economics; Economic Theory & Research; Markets and Market Access; Consumption
Language:EnglishMajor Sector:Industry and trade
Rel. Proj ID:1W-Trade Costs And Development -- -- P133550;Region:The World Region
Report Number:WPS6785Sub Sectors:Other domestic and international trade
Collection Title:Policy Research working paper ; no. WPS 6785Impact Evaluation series ; no. IE 116TF No/Name:TF013652-Trade costs and development
Volume No:1  

Summary: 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.

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