Hysteresis and the Welfare Effect of Corrective Policies
Theory and Evidence from an Energy-Saving Program
Bibliographic Data
| ID | 10177903 |
|---|---|
| Authors | Francisco Costa (0000-0003-4042-0408, University of Delaware), François Gérard (0000-0003-1397-7155, Queen Mary University of London) |
| Year | 2021 |
| Volume | 129 |
| Issue | 6 |
| Pages | 1705-1743 |
| Publication date | 2021-01-26 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/713729 |
| OpenAlex | W3121829995 |
| Language | EN |
| Citations received | 2 |
| References cited | 23 |
This paper provides stark evidence of hysteresis—the failure of an effect to reverse itself as its underlying cause is reversed—in energy demand. We estimate that half of the 23% reduction in residential electricity use caused by a 9-month-long policy that was imposed on millions of Brazilians has persisted for at least 12 years. We examine the implications of our finding by extending the traditional welfare analysis of corrective policies to allow for hysteresis. Our estimate highlights that failing to take hysteresis into account could severely bias the welfare evaluation of policies aimed at reducing (long-run) energy demand
Economics · Electricity · Energy (signal processing · Hysteresis · Market economy · Public economics · Welfare · Climate Change Policy and Economics · Economic and Environmental Valuation · Engineering · Fiscal Policy and Economic Growth
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| Citations per year | 2 |
|---|---|
| Citation span | 2025 - 2026 (2) |
| Highly cited | No |