This is a Free article. You will receive access to the full text.

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

Free Article

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 Download PDF

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

JEL Codes: C51: Model Construction and Estimation, Q41: Energy: Demand and Supply; Prices, G12: Asset Pricing; Trading Volume; Bond Interest Rates, Q33: Resource Booms, C52: Model Evaluation, Validation, and Selection, Q42: Alternative Energy Sources, Q35: Hydrocarbon Resources

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 bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy