Demand Function for Industrial Electricity: Evidence from South Korean Manufacturing Sector
Hyo-Jin Kim (),
Gyeong-Sam Kim () and
Seung-Hoon Yoo ()
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Hyo-Jin Kim: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea
Gyeong-Sam Kim: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea
Seung-Hoon Yoo: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea
Sustainability, 2019, vol. 11, issue 18, 1-11
Electricity is a crucial input to the industrial production of South Korea. Estimating the demand function for electricity in the manufacturing sector is an important task because electricity consumption in the manufacturing sector accounts for 56.3% of total electricity consumption in South Korea. Thus, this article tries to estimate the demand function for industrial electricity in the manufacturing sector of South Korea using cross-sectional data for analyzing the influence of manufacturing firms’ characteristics. To this end, 946 observations collected from a nationwide survey of manufacturing firms in 2018 are used and analyzed. As a robust approach, the least absolute deviations estimation method is applied to obtaining the demand function. The results show that the price elasticity and the sales amount elasticity of the industrial electricity demand are estimated to be −0.9206 and 0.2568, respectively, which are statistically significant at the 1% level. Furthermore, the economic benefits of industrial electricity consumption are computed to be 1.46 times as great as the price of electricity. The results of this study can be utilized in policy planning, making, and evaluation.
Keywords: industrial electricity; demand function; price elasticity; least absolute deviations; economic benefits (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:18:p:5112-:d:268409
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