Featured Cover Bates, Michael; Kim, Seolah
Journal of applied econometrics (Chichester, England),
June/July 2024, 2024-06-00, 20240601, Volume:
39, Issue:
4
Journal Article
Peer reviewed
The cover image is based on the Research Article Estimating the price elasticity of gasoline demand in correlated random coefficient models with endogeneity by Michael Bates and Seolah Kim ...https://doi.org/10.1002/jae.3042.
Designing customized dynamic pricing is a promising way to incent consumers to adjust their daily energy consumption behaviors. It helps manage flexible demand response resources on peak load. ...However, it is insufficiently investigated in previous studies from the individual behavior perspective. To tackle the gap, this paper proposes a graph deep learning-based retail dynamic pricing mechanism. First, a graph attention network-based temporal price elasticity perceptron model is proposed. It explores a novel path to learn price elasticity by using graph deep learning, and can accurately assess consumers energy consumption behaviors under different prices. Then, to avoid unfair evaluation of demand response, two indexes are proposed as auxiliary measures to assess energy consumption behavior learning models. At last, a customized dynamic pricing model based on the temporal price elasticity perceptron model is proposed. It can develop consumers time-varying demand response potential. This potential is first defined in this paper to measure what potentials of shifting/curtailing energy during a period a consumer has. By the pricing, the consumer could be incented to engage in demand response. The numerical studies validate the feasibility and superiority of the proposed methods, meanwhile price risks from the price change can be hedged effectively.
What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral ...channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each $1 of collateral.
We study the residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997–2007. Our dataset is a mixed panel/multi-year cross-sections ...of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the −
0.860 to −
0.667 range, while the own price elasticity of gas demand is −
0.693 to −
0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999; Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated.
Price policy applied to specific products may mitigate consumption carbon emissions (CCE). Nevertheless, the extent to which price effects, such as carbon taxes, differ across income groups and ...between rural and urban areas in China remains uncertain. With unbalanced provincial panel data from 1999 to 2020, we estimated the demand elasticities of eight major groups of consumer goods and services across income groups separately in rural and urban areas of China, using the Quadratic Almost Ideal Demand System (QUAIDS) and the Exact Affine Stone Index Implicit Marshallian demand system (EASI) in this study. The estimated price elasticities were then used to predict the impact of different price policies on CCE. The results show that taxing the wealthiest individuals and subsidizing the poorest individuals in both rural and urban areas have a beneficial impact on the reduction in CCE. Moreover, expanding transfer payments can further facilitate reductions in CCE. Our findings suggest that achieving CCE equality can be realized through intra-urban and intra-rural transfers, as well as urban-rural transfers achieved by taxing urban residents and subsidizing rural residents.
•Consumption carbon emissions (CCE) in China show heterogeneity among different income groups and urban-rural areas.•Price policies have the potential to mitigate consumption inequality and diminish CCE.•Although the EASI model exhibits greater flexibility than the QUAIDS model, it does not influence the conclusion.•The prices of food and residence play a significant role in interventions aimed at reducing CCE.•The price elasticities concerning CCE for Food, Transport, and Residence are all negative.
In this study, we develop a novel analysis framework for evaluating the effects of resource reallocation from the correction of factor market distortion (FMD) on total factor productivity (TFP) ...gains. We first measure FMD in China's heavy industry sector from 1995 to 2012, and then investigate the effects of resource reallocation from FMD correction by using the price elasticity of factor demands as a link, along with its potential TFP gains. The results indicate that: (1) Taking the price of capital as a reference, the prices of labour and energy in the study period were relatively higher to different extents. (2) If current FMD were fully corrected, the labour input in China's heavy industry sector would increase by 25.37%, whereas capital and energy inputs would decrease by 18.51% and 10.57%, respectively. (3) The resource reallocation effects resulting from current FMD correction will bring about significant TFP improvement (by 8.55%) in China's heavy industry sector, and there are evident industrial differences and stage characteristics for these promoting effects.
•We measure the factor market distortions (FMD) of China's heavy industry sector.•The effects of resource reallocation from a full correction of FMD are evaluated.•TFP gains from resource reallocation with the correction of FMD are investigated.•Significant productivity improvements from the FMD correction can be achieved.•This promoting effect has evident industrial differences and stage characteristics.
We apply a quadratic expenditure system to estimate price and expenditure elasticities of residential energy demand (electricity and heating) in Germany. Using official expenditure data from 1993 to ...2008, we estimate an expenditure elasticity for electricity of 0.3988 and of 0.4055 for space heating. The own price elasticity for electricity is −0.4310 and −0.5008 in the case of space heating. Disaggregation of households by expenditure and socio-economic composition reveals that the behavioural response to energy price changes is weaker (stronger) for low-income (top-income) households. There are considerable economies of scale in residential energy use but scale effects are not well approximated by the new OECD equivalence scale. Real increases in energy prices show a regressive pattern of incidence, implying that the welfare consequences of direct energy taxation are larger for low income households. The application of zero-elasticities in assessments of welfare consequences of energy taxation strongly underestimates potential welfare effects. The increase in inequality is 22% smaller when compared to the application of disaggregated price and income elasticities as estimated in this paper.
•We estimate price, income, and expenditure elasticities for residential energy demand in Germany.•We differentiate elasticities by income groups and household type.•Electricity and space heating are necessary goods since the expenditure elasticities are smaller than unity.•Low-income households show a weaker reaction to changing prices when compared to high-income households.•Direct energy taxation has regressive effects, meaning that larger burdens fall upon low-income households.
Widespread malnutrition in developing countries calls for appropriate strategies, presupposing good knowledge about nutritional impacts of policies. Little previous work has been carried out in this ...direction, especially with respect to micronutrients. We use representative household data from Malawi and develop a demand systems approach to estimate income and price elasticities of food demand and nutrient consumption. These estimates are applied for policy simulations. Given multiple nutritional deficiencies, income-related policies are better suited than price policies to improve nutrition. While consumer price subsidies for maize improve calorie and mineral consumption, they can worsen vitamin consumption in urban areas.
How can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention? I derive bounds on structural price elasticities that are a function of the ...observed effect of a price change on demand, the size of the price change, and the degree of frictions. The degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum. The bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities. I apply these bounds to the literature on labor supply. The utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1% of earnings. As a result, small frictions can explain the differences between micro and macro elasticities, extensive and intensive margin elasticities, and other disparate findings. Pooling estimates from existing studies, I estimate a Hicksian labor supply elasticity of 0.33 on the intensive margin and 0.25 on the extensive margin after accounting for frictions.
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