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Estimation of Demand System for Household Energy Consumption: Empirical Evidence from Indonesia

Author

Listed:
  • Mohtar Rasyid

    (Faculty of Economics and Business, Universitas Trunojoyo Madura, Indonesia.)

  • Anita Kristina

    (Faculty of Economics and Business, Universitas Trunojoyo Madura, Indonesia.)

Abstract

This study aims to estimate the pattern of household demand for energy consumption such as electricity, water and fuel. The data used in this study is the publication of the Indonesia Family Life Survey (IFLS). To obtain comprehensive estimation results, this study uses the Quadratic Almost Ideal Demand System (QUAIDS) approach which is currently the standard in household demand estimation systems. The unit of observation used in this paper is more than three thousand households representing 13 provinces in Indonesia. The results show that the largest household energy consumption expenditure is electricity consumption followed by fuel and water. However, unlike the case of other commodities, the elasticity of spending on electricity is negative. Thus, an increase in household income will shift spending from electricity to consumption of other goods such as fuel, water and others. Meanwhile, the price elasticity for all energy commodities is inelastic. The increase in energy consumption commodity prices did not change demand much. This means that households are still very dependent on the supply of energy goods produced by the government. Therefore, appropriate policies are needed in determining the basic electricity tariff, fuel prices and clean water supply so that basic household needs can be fulfilled.

Suggested Citation

  • Mohtar Rasyid & Anita Kristina, 2021. "Estimation of Demand System for Household Energy Consumption: Empirical Evidence from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 289-295.
    • Handle: RePEc:eco:journ2:2021-06-34
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    References listed on IDEAS

    as
    1. Mohtar Rasyid & Anita Kristina & Sutikno & Sunaryati & Tutik Yuliani, 2020. "Poverty Conditions and Patterns of Consumption: An Engel Function Analysis in East Java and Bali, Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(10), pages 1062-1076.
    2. Mohtar Rasyid & Anita Kristina & Sutikno & Sunaryati & Tutik Yuliani, 2020. "Poverty Conditions and Patterns of Consumption: An Engel Function Analysis in East Java and Bali, Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(10), pages 1062-1076, October.
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    Cited by:

    1. Mardones, Cristian & Alvial, Esteban, 2024. "Evaluation of a carbon tax in Costa Rica linking a demand system focused on energy goods and an input-output model," Applied Energy, Elsevier, vol. 363(C).

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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