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The Energy Demand in the Industrial Sector of Pakistan

Author

Listed:
  • Salim Chishti

    (Applied Economics Research Centre, University of Karachi.)

  • Fakhre Mahmood

    (Applied Economics Research Centre, University of Karachi.)

Abstract

The purpose of this study is to analyse the role of energy in the manufacturing sector of Pakistan. The translog cost function alongwith the input demand equations corresponding to energy, capital, and labour have been estimated, using Zellner's iterative procedure. Time trend has been included in the cost equation in view of the low Durbin-Watson statistics. The results justify the inclusion of energy as a separate factor of production. Price elasticities and Allen-Uzawa partial substitution elasticities have been estimated. Own price elasticities indicate a rather inelastic demand for inputs. Cross-price elasticities show that energy and labour, and capital and labour are substitutes. The partial substitution elasticities between energy and capital are negative; which implies that higher energy prices will adversely affect investment in capital goods. On the other hand, the positive substitution elasticity between energy and employment implies that higher energy prices would induce more labour absorption.

Suggested Citation

  • Salim Chishti & Fakhre Mahmood, 1991. "The Energy Demand in the Industrial Sector of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 30(1), pages 83-88.
    • Handle: RePEc:pid:journl:v:30:y:1991:i:1:p:83-88
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    File URL: http://www.pide.org.pk/pdf/PDR/1991/Volume1/83-88.pdf
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    References listed on IDEAS

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    1. Pasha, Hafiz A. & Ghaus, Aisha & Malik, Salman, 1989. "The economic cost of power outages in the industrial sector of Pakistan," Energy Economics, Elsevier, vol. 11(4), pages 301-318, October.
    2. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-857, December.
    3. Magnus, Jan R, 1979. "Substitution between Energy and Non-Energy Inputs in the Netherlands, 1950-1976," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 465-484, June.
    4. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-268, August.
    5. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, vol. 5(1), pages 89-116, January.
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    Cited by:

    1. Eatzaz Ahmad & Muhammad Idrees, 1999. "The Time Profile of the Cost Structure in Pakistan’s Manufacturing Sector," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 1101-1116.
    2. Rehana Siddiqui & Rashida Haq, 1999. "Demand for Energy and the Revenue Impact of Changes in Energy Prices," PIDE Research Report 1999:2, Pakistan Institute of Development Economics.
    3. Iffat Ara, 2004. "Is Pakistan’s Manufacturing Sector Competitive?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 685-706.
    4. Burki, Abid A. & Khan, Mahmood-ul-Hasan, 2004. "Effects of allocative inefficiency on resource allocation and energy substitution in Pakistan's manufacturing," Energy Economics, Elsevier, vol. 26(3), pages 371-388, May.
    5. Sajid Hussain & Uzma Nisar & Waseem Akram, 2020. "An Analysis of the Cost Structure of Food Industries in Pakistan: An Application of the Translog Cost Function," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 25(2), pages 1-22, July-Dec.
    6. Khalid, Waqar & Özdeşer, Hüseyin & Jalil, Abdul, 2021. "An empirical analysis of inter-factor and inter-fuel substitution in the energy sector of Pakistan," Renewable Energy, Elsevier, vol. 177(C), pages 953-966.

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