Estimates of the demand for energy using cross-country consumption data
Using cross-country consumption data we estimate a system of demand equations in a piecewise manner to investigate whether price and expenditure elasticities for energy differ between broad groups of countries. The empirical results reject the assumption of constant parameters across regimes of poor and rich countries. The derived elasticities suggest that the own-price elasticity for energy is higher in poor than in rich countries. We find no evidence for the commonly held view that expenditure elasticities for energy decline with income.