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Estimating Consumer Energy Demand Using International Data: Theoretical and Policy Implications

In this paper, consumer energy demand is estimated as part of a complete demand system using a consistent set of international data on prices, and expenditures for 53 countries ranging from the poorest to the wealthiest. We compare three models: the Translog, the Deaton-Muellbauer Almost Ideal! Demand System (DM), and the Generalized Logit (Logit), and two levels of commodity aggregation (6-good and 9-good). The estimation results indicate that the model specification and level of aggregation are important. The Logit model performs better than the Translog and D-M models which provide illogical! elasticity estimates for many countries. The 9-good model shows that the demand for electricity is significantly more price and income elastic than the demand for primary energy.

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Energy Specializations: Energy Modeling – Sectoral Energy Demand & Technology

JEL Codes:
Q55 - Environmental Economics: Technological Innovation

Keywords: Consumer energy demand, AIDS model, Logit, Translog, Energy policy

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-4

Published in Volume15, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.