Dr. Daniel Karney
Dr. Daniel Karney presents the paper titled “U.S Residential Electricity Demand Elasticity Estimation Accounting for State-level Heterogeneity and Cross-sectional Dependence.” This Economics Seminar is Friday, Nov. 20, at 3 p.m. in Bentley Annex 302.
Karney is Assistant Professor of Economics at Ohio University.
Summary: This study estimates the long-run, own-price elasticity of demand for U.S. residential electricity during the years 1990-2013 using state-level data, and differs from prior studies by using a new estimator that accounts for cross-sectional heterogeneity and dependence in a simple but robust methodology. This new estimator is called the Common Correlated Effect Mean Group (CCEMG) estimator (Pesaran, 2006). The preferred elasticity estimate using the CCEMG is -0.1375 with a 95% C.I. [-0.2170, -0.0580] and p-value less than 0.001. The residuals of this CCEMG estimation are tested and one is unable to reject the null hypothesis that the residuals exhibit cross-sectional independence. This study’s estimate is at the low-end of previous elasticity estimates.
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