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The Relationship Between Energy Intensity and Income Levels: Forecasting Long Term Energy Demand in Asian Emerging Countries

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  • Rossana Galli
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    Abstract

    This paper analyses long-term trends in energy intensity for ten Asian emerging countries to test for a non-monotonic relationship between energy intensity and income in our sample. We estimate energy demand functions during 1973 1990 using a quadratic function of log income. We find that the long-run coefficient on squared income is negative and significant, indicating a change in trend of energy intensity. We then use our estimates to evaluate a medium-term forecast of energy demand in the Asian countries, using both a log-linear and a quadratic model. We find that in medium to high income countries the quadratic model performs better than the log-linear, with an average error of 9% against 43% in 1995. For the region as a whole, the quadratic model appears more adequate with a forecast error of 16% against 28% in 1995. These results are consistent with a process of dematerialization, which occurs as a result of a reduction of resource use per unit of GDP once an economy passes some threshold level of GDP per capita.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume19 (1998)
    Issue (Month): Number 4 ()
    Pages: 85-105

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    Handle: RePEc:aen:journl:1998v19-04-a04

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    Cited by:
    1. Lescaroux, François, 2011. "Dynamics of final sectoral energy demand and aggregate energy intensity," Energy Policy, Elsevier, vol. 39(1), pages 66-82, January.
    2. Paul Crompton & Yanrui Wu, 2004. "Energy Consumption in China: Past Trends and Future Directions," Economics Discussion / Working Papers 04-22, The University of Western Australia, Department of Economics.
    3. Sadorsky, Perry, 2013. "Do urbanization and industrialization affect energy intensity in developing countries?," Energy Economics, Elsevier, vol. 37(C), pages 52-59.
    4. Hübler, Michael & Keller, Andreas, 2010. "Energy savings via FDI? Empirical evidence from developing countries," Environment and Development Economics, Cambridge University Press, vol. 15(01), pages 59-80, February.
    5. Yoosoon Chang & Yongok Choi & Chang Sik Kim & Joon Y. Park & J. Isaac Miller, 2013. "Disentangling Temporal Patterns in Elasticities: A Functional Coefficient Panel Analysis of Electricity Demand," Working Papers 1320, Department of Economics, University of Missouri.
    6. Elliott, Robert J.R. & Sun, Puyang & Chen, Siyang, 2013. "Energy intensity and foreign direct investment: A Chinese city-level study," Energy Economics, Elsevier, vol. 40(C), pages 484-494.
    7. Wagner, Gernot, 2010. "Energy content of world trade," Energy Policy, Elsevier, vol. 38(12), pages 7710-7721, December.
    8. Abdolnaser Hemmati, 2006. "A Change in Energy Intensity: Test of Relationship between Energy Intensity and Income in Iran," Iranian Economic Review, Economics faculty of Tehran university, vol. 11(1), pages 123-130, winter.
    9. Yoosoon Chang & Chang Sik Kim & J. Isaac Miller & Joon Y. Park & Sungkeun Park, 2014. "Time-varying Long-run Income and Output Elasticities of Electricity Demand," Working Papers 1409, Department of Economics, University of Missouri.
    10. Mallah, Subhash & Bansal, N.K., 2010. "Renewable energy for sustainable electrical energy system in India," Energy Policy, Elsevier, vol. 38(8), pages 3933-3942, August.
    11. Mallah, Subhash & Bansal, N.K., 2010. "Allocation of energy resources for power generation in India: Business as usual and energy efficiency," Energy Policy, Elsevier, vol. 38(2), pages 1059-1066, February.
    12. Kumar, Saten, 2008. "Cointegration and the Demand for Energy in Fiji," MPRA Paper 18704, University Library of Munich, Germany.
    13. Huntington, Hillard G., 2011. "Backcasting U.S. oil demand over a turbulent decade," Energy Policy, Elsevier, vol. 39(9), pages 5674-5680, September.
    14. Aldy, Joseph E., 2006. "Energy and Carbon Dynamics at Advanced Stages of Development: An Analysis of the U.S. States, 1960–1999," Discussion Papers dp-06-13, Resources For the Future.
    15. Jimenez, Raul & Mercado, Jorge, 2014. "Energy intensity: A decomposition and counterfactual exercise for Latin American countries," Energy Economics, Elsevier, vol. 42(C), pages 161-171.
    16. Robert J R Elliott & Puyang Sun & Tong Zhu, 2014. "Urbanization and Energy Intensity: A Province-level Study for China," Discussion Papers 14-05, Department of Economics, University of Birmingham.

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