Macro energy–GDP relationship

Brantley Liddle

Chapter 82 in Elgar Encyclopedia of Energy Economics, 2025, pp 314-319 from Edward Elgar Publishing

Abstract: Energy services are used to produce final goods and services and are themselves final normal consumption goods. Both Cobb–Douglas-type production functions and a demand model (with income and prices as explanatory variables) have been used to examine the macro-relationship between energy/electricity consumption and GDP. Evidence suggests that the macro demand model is based on a more robust causal relationship. The demand model estimates larger elasticities than the production function. Recent analyses have determined that GDP elasticity of energy demand is around 0.7 (or lower)—thus, energy intensity will fall with economic growth, is similar for middle-income/non-OECD and high-income/OECD countries, and has been fairly stable since the mid-1980s/1990s. While less studied than economy-wide energy demand, findings for the GDP elasticity of economy-wide electricity demand are similar with one exception. GDP elasticity of electricity demand for OECD countries has declined over time and could be as low or lower than 0.2.

Keywords: GDP Elasticity of Energy Consumption; Economy-Wide Energy and Electricity Demand; Macro Production Function; Macro Energy/Electricity Demand Model; Energy and Development; Energy Intensity (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035310364
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