Residential Demand for Electricity in Pakistan

Muhammad Nasir (), Muhammad Tariq and Ankasha Arif
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Ankasha Arif: Department of Economics, Quaid-i-Azam university, Islamabad.

The Pakistan Development Review, 2008, vol. 47, issue 4, 457-467

Abstract: For about a year now, Pakistan is facing the worst energy crisis of her history. If on one hand, the increase in the oil prices at the world level is severely affecting the common masses, on the other hand, the shortage of electricity is creating havoc in the country. Beside others, one important reason that is advocated for this shortage is the rise in electricity demand due to increase in production as well as rise in household income. Furthermore, it is believed that increasing the unit price of electricity will reduce the electricity demand. That is why the unit prices of electricity vary with different range of unit usage. This motivates us to calculate price elasticity as well. Hence, using time series data from 1979 to 2006, we estimated ARDL model to investigate income and price elasticities of electricity demand. Our results show that electricity demand is price inelastic in both short run and long run. Moreover, income elasticity is almost unitary in short run as well as in long run. In addition, household size has a strong positive impact on electricity demand in Pakistan.

Keywords: Energy Crises; Income Elasticity; Price Elasticity; ARDL Model; Residential Demand (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (17)

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