Understanding the Energy-GDP Elasticity: A Sectoral Approach

40 Pages Posted: 24 Jul 2016

See all articles by Paul J. Burke

Paul J. Burke

Australian National University (ANU) - Crawford School of Public Policy

Zsuzsanna Csereklyei

Australian National University (ANU) - Crawford School of Public Policy

Date Written: July 1, 2016

Abstract

This paper uses per capita data for 132 countries over 1960–2010 to estimate elasticities of sectoral energy use with respect to national gross domestic product (GDP). We estimate models in both levels and growth rates and use our estimates to sectorally decompose the aggregate energy-GDP elasticity. Our estimates show that residential energy use is very inelastic to GDP if primary solid biofuels are counted in energy use tallies, especially at low income levels. Residential use of electricity is more tightly linked to GDP, as is energy use by the transportation, industrial, and services sectors. Agriculture typically accounts for a small share of energy use and has a modest energy-GDP elasticity. The aggregate energy-GDP elasticity tends to be higher for countries at higher income levels, in large part because traditional use of primary solid biofuels is less important. Gasoline prices, winter temperature, population, and land area are among other factors influencing sectoral energy use.

Keywords: elasticity, sectoral, energy use, economic development, economic growth, decomposition

JEL Classification: O13, Q43, O11

Suggested Citation

Burke, Paul J. and Csereklyei, Zsuzsanna, Understanding the Energy-GDP Elasticity: A Sectoral Approach (July 1, 2016). CAMA Working Paper No. 45/2016 . Available at SSRN: https://ssrn.com/abstract=2813024 or http://dx.doi.org/10.2139/ssrn.2813024

Paul J. Burke (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, Australian Capital Territory ACT 0200
Australia

Zsuzsanna Csereklyei

Australian National University (ANU) - Crawford School of Public Policy ( email )

Canberra, Australian Capital Territory 2601
Australia

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