Monday, October 30, 2017 at 10:30am to 12:00pm
Warren Hall 401, 401
In 2016 natural gas became the United States’ primary source of energy for electricity generation. It is also the main heating fuel for more than 50% of American homes. Hence understanding residential natural gas consumption behavior has become a first-order problem. In this paper, we provide the first ever causally identified, microdata-based estimates of residential natural gas demand elasticities using a decade-long panel of more than 275 million bills in California. To overcome multiple sources of endogeneity, we utilize the border between two major natural-gas utilities, in conjunction with an instrumental variables strategy. We estimate the elasticity of demand for residential natural gas is between -0.31 and -0.17. We also provide evidence of seasonal and income-based heterogeneity in this elasticity. This heterogeneity provides unexplored policy avenues that may be simultaneously efficiency-enhancing and pro-poor.