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Does the income elasticity of energy demand vary with the stages of economic development?

Year: 2024

Type: article

Abstract: This paper revisits the empirical evidence on the income elasticity of energy demand by investigating whether it varies with the level of economic development . We estimate the elasticity using mean-group type estimators for a sample of 111 countries spanning three decades. Our analysis reveals that the elasticity is not constant and tends to decline as countries become wealthier. As economies become more developed, their energy intensity falls, eventually reaching zero elasticity, indicating a decoupling between economic growth and energy demand. This finding underscores the importance of considering countries’ stages of economic development when making energy outlook projections.

Source: Economics Letters

DOI: 10.1016/j.econlet.2024.112055

Authors: Nader AlKathiri, Abdulelah Darandary, Jeyhun I. Mikayilov

Institution: King Abdullah Petroleum Studies and Research Center

Language: English

Topic: Energy, Environment, Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Affordable and clean energy, Industry, innovation and infrastructure, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $2,980