Household Energy Elasticities in Pakistan: An Application of the LA-AIDS Model on Pooled Household Data

Muhammad Irfan, Michael Cameron and Gazi Hassan ()

Working Papers in Economics from University of Waikato

Abstract: This study aims to estimate the fuel expenditure and price elasticities of household fuels in Pakistan. Burning of wood, animal dung, and crop residues are harmful to health and may cause preventable morbidity and mortality in developing countries. Forests, natural gas and other energy reserves are depleting. It is important to investigate how households’ fuel choices are linked to prices, so that governments can consider appropriate steps to enhance the consumption of clean fuels and discourage the use of solid fuels. In this paper we pooled three Pakistan Social and Living Standard Measurement Survey (PSLM) data sets (2007-08, 2010-11 and 2013-14) and applied the Linear Approximate Almost Ideal Demand System (LA-AIDS) model to investigate the price and expenditure elasticities at urban, rural, and national levels. We found that all fuel types except natural gas were price inelastic at the national level and for urban households, implying that changes in prices lead to comparatively lesser changes in quantity demanded of most fuels. In rural areas, natural gas and LPG were found to be more price elastic compared with urban areas. Fuel expenditures elasticities for all fuels were found to be positive and between zero and one. Simple policy simulations based on our results suggest that in order to reduce the indoor air pollution, governments should subsidise clean fuels rather than imposing taxes on solid fuels.

Keywords: household energy; elasticities; LA-AIDS; Pakistan (search for similar items in EconPapers)
JEL-codes: O13 P28 Q41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-05-23
New Economics Papers: this item is included in nep-dcm, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repec.its.waikato.ac.nz/wai/econwp/1711.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:17/11

Access Statistics for this paper

More papers in Working Papers in Economics from University of Waikato Private Bag 3105, Hamilton, New Zealand, 3240. Contact information at EDIRC.
Bibliographic data for series maintained by Geua Boe-Gibson ().