Understanding the role of economic transition in enlarging energy price elasticity |
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Authors: | Jianglong Li Zhi Li |
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Institution: | 1. School of Economics and Finance, Xi'an Jiaotong University, China;2. China Center for Energy Economics Research, School of Economics, Xiamen University, China |
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Abstract: | Evidence of energy price elasticity would allow for a better understanding of economic, distributional and environmental consequences of varying energy prices. We document the previously unnoticed causal relationship between energy price elasticity and economic transition by modelling energy price elasticity as endogenous to the economic system. The central message is that economic transition promotes incentives and flexibility of micro‐units to sufficiently use price signals. Three potential mechanisms are proposed and tested for economic transition affecting the energy price elasticity. The findings provide implications for energy price policies because it reveals how energy consumers respond to energy price changes alongside economic transition. |
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Keywords: | Economic transition energy price elasticity factor/product markets affect mechanism |
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