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Time-varying income and price elasticities for energy demand: Evidence from a middle-income panel

Brantley Liddle, Russell Smyth and Xibin Zhang ()

Energy Economics, 2020, vol. 86, issue C

Abstract: We estimate time-varying income and price elasticities for energy demand for a 26-country, middle-income balanced panel that spans 1996–2014. To do so, we employ a recently developed local linear dummy estimation method to estimate the trend and coefficient functions. We find that the price elasticity for energy demand is either insignificant or positive and small. While the income elasticity for energy demand behaves in a non-linear fashion over-time, it is always less than unity and is generally within 0.6–0.8. A GDP elasticity of less than one suggests that these middle-income countries are on the right-hand-side of an inverted-U energy intensity-GDP path that is consistent with the dematerialization process. Also, this finding suggests that energy intensity — but not energy consumption — in these countries will fall with economic growth. Hence, intensity-based targets may be met in a business-as-usual setting, but aggregate or per capita-based carbon emissions targets would likely require policy interventions.

Keywords: Income elasticity; Price elasticity; Time-varying; Middle-income countries (search for similar items in EconPapers)
JEL-codes: C14 O13 Q41 Q43 Q5 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988320300207

DOI: 10.1016/j.eneco.2020.104681

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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