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Short-Run and Long-Run Elasticities of Diesel Demand in Korea

Author

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  • Kyoung-Min Lim

    () (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea)

  • Myunghwan Kim

    () (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea)

  • Chang Seob Kim

    () (Department of Energy IT, Gachon University, Bokjeong-dong, Sujeong-gu, Seongnam-si, Gyeonggi-do 461-701, Korea)

  • Seung-Hoon Yoo

    () (Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 139-743, Korea)

Abstract

This paper investigates the demand function for diesel in Korea covering the period 1986–2011. The short-run and long-run elasticities of diesel demand with respect to price and income are empirically examined using a co-integration and error-correction model. The short-run and long-run price elasticities are estimated to be −0.357 and −0.547, respectively. The short-run and long-run income elasticities are computed to be 1.589 and 1.478, respectively. Thus, diesel demand is relatively inelastic to price change and elastic to income change in both the short-run and long-run. Therefore, a demand-side management through raising the price of diesel will be ineffective and tightening the regulation of using diesel more efficiently appears to be more effective in Korea. The demand for diesel is expected to continuously increase as the economy grows.

Suggested Citation

  • Kyoung-Min Lim & Myunghwan Kim & Chang Seob Kim & Seung-Hoon Yoo, 2012. "Short-Run and Long-Run Elasticities of Diesel Demand in Korea," Energies, MDPI, Open Access Journal, vol. 5(12), pages 1-10, November.
  • Handle: RePEc:gam:jeners:v:5:y:2012:i:12:p:5055-5064:d:21800
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    References listed on IDEAS

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    Cited by:

    1. Donald A. P. Bundy & Nilanthi de Silva & Susan Horton & Dean T. Jamison & George C. Patton, 2017. "Disease Control Priorities, Third Edition," World Bank Publications, The World Bank, number 28876, August.
    2. Chi, Junwook, 2016. "Long- and short-run asymmetric responses of motor-vehicle travel to fuel price variations: New evidence from a nonlinear ARDL approach," Transport Policy, Elsevier, vol. 50(C), pages 126-134.
    3. Bigerna, S. & Bollino, C.A. & Micheli, S. & Polinori, P., 2017. "Revealed and stated preferences for CO2 emissions reduction: The missing link," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P2), pages 1213-1221.

    More about this item

    Keywords

    elasticity; diesel demand; Korea; co-integration; error-correction model;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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