Bootstrapping for consistent standard errors for translog price elasticities Some evidence from industrial electricity demand

This note extends the Hirschberg-Aigner method for deriving price elasticities of various time differentiated electric inputs, using estimated cost-share elasticities in a translog formulation. The H-A method leaves out an important component of variance - as the estimated cost share elasticities are themselves estimates and are not known quantities. This omission leads to overestimating the significance levels of price elasticities. With our extension using repeated sampling techniques such as bootstrapping, the price elasticity estimates (significant when derived through the H-A method) now become insignificant. This points out the need for such an extension when evaluating computed price elasticity estimates, particularly when these are used in policy-making.