The neighboring towns of East Magoo and West Magoo are divided by the Quincy River. The towns are similar in geographic size and population. The homes in both towns are powered entirely by electricity provided by Backus County Power and Light, which charges a standardized rate of $0.10 per kilowatt hour (kWh). Both East Magoo and West Magoo add on an additional $0.02 per kilowatt hour as an energy use tax. As a way to increase revenue, the mayor of East Magoo persuaded the town council to double the energy use tax on all residents, effective January 1, 2015. The average monthly energy usage per home is listed in the table below. Use the difference- in-differences method to estimate the effect of the increase in the energy use tax on the average monthly amount of energy used per home in East Magoo.

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Average Monthly Energy Üse per Home 2014 2015 Town East Magoo West Magoo 1,917 kWh 2,033 kWh 1775 kWh 1,815 kWh