Semi-Nonparametric Estimation of Energy Demand in Tunisia

Monia Landolsi and Kamel Bel Hadj Miled
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Monia Landolsi: Department of Basic Sciences, Deanship of Preparatory Year and Supporting Studies, Imam Abdulrahman Bin Faisal University, P.O. Box 1982, Dammam, 34212, Saudi Arabia

International Journal of Energy Economics and Policy, 2024, vol. 14, issue 1, 254-263

Abstract: In this paper, we have studied the possibilities of substitution between different forms of energy at the sectoral level in Tunisia. Indeed, we estimated a globally flexible functional form of Fourier type using the iterative Zellner’s seemingly unrelated regression (ITSUR). Contrary to several previous studies in the literature, we calculated the price (proper and crossed) and income elasticities, the elasticities of substitution in the sense of Allen, as well as the elasticities of substitution in the sense of Morishima for the period (1980-2017). The results show that price and income elasticities differ from one energy product to another and from one sector to another, depending on the destination (final or intermediate) and the nature of use. Additionally, the findings suggest that energy demand is more sensitive to changes in income rather than changes in price. It is noteworthy that the absolute value of price elasticity is lower than that of income elasticity. Implementing an appropriate pricing policy can help limit the income effect and encourage economic agents to make efforts to save energy. Our results also indicate that any pricing policy aiming to reduce energy consumption must consider the possibilities of substituting between products. Otherwise, this policy may yield results contrary to the intended objectives.

Keywords: Fourier Flexible Functional Form; Iterative Zellner’s Seemingly Unrelated Regression; Energy Demand; Income and Price Elasticities; Elasticities of Substitution (search for similar items in EconPapers)
JEL-codes: C3 Q41 Q42 (search for similar items in EconPapers)
Date: 2024
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