The Demand for Energy-Using Assets among the World's Rising Middle Classes

Paul Gertler, Orie Shelef, Catherine D. Wolfram and Alan Fuchs

American Economic Review, 2016, vol. 106, issue 6, 1366-1401

Abstract: We study household decisions to acquire energy-using assets in the presence of rising incomes. We develop a theoretical framework to characterize the effect of income growth on asset purchases when consumers face credit constraints. We use large and plausibly exogenous shocks to household income generated by the conditional-cash-transfer program in Mexico, Oportunidades, to show that asset acquisition is nonlinear, depends, as predicted in the presence of credit constraints, on the pace of income growth, and both effects are economically large among beneficiaries. Our results may help explain important worldwide trends in the relationship between energy use and income growth.

JEL-codes: D12 I32 I38 O12 O13 Q47 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20131455
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