IDEAS home Printed from https://ideas.repec.org/h/era/chaptr/2011-rpr-17-02.html

Economic Development, Energy Market Integration and Energy Demand: Implication for East Asia

In: Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies

Author

Listed:
  • Yu Sheng
  • Xunpeng Shi

Abstract

This paper uses the General Method of Moment (GMM) regression technique to estimate an cross-country energy demand function with a data set covering 71 countries over the period of 1965-2010. The estimated results show that rapid economic growth due to industrialization and urbanization tends to increase the energy consumption per capita, which in turn may generate a surge in the overall demand for energy. As is shown in the econometric results, an increase in economic growth (i.e. the dummy of GDP level) may increase 0.6 per cent of energy consumption per capita. Moreover, economic growth also leads to lower price and income elasticities (in absolute terms). However, energy market integration can help to reduce the energy demand pressure and to smooth the demand shock through decreasing the income elasticity and increasing the price elasticity in particular in the long run. This finding can be used to explain how cross-country institutional arrangement related to energy market may affect regional energy consumption patterns over the period of rapid economic growth and offer policy implications for East Asia, which is diversified in terms of development level.

Suggested Citation

  • Yu Sheng & Xunpeng Shi, . "Economic Development, Energy Market Integration and Energy Demand: Implication for East Asia," Chapters, in: Yanrui Wu & Xunpeng Shi & Fukunari Kimura (ed.), Energy Market Integration in East Asia: Theories, Electricity Sector and Subsidies, chapter 2, pages 11-35, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:chaptr:2011-rpr-17-02
    as

    Download full text from publisher

    File URL: http://www.eria.org/Chapter%202-Economic%20Development%2C%20Energy%20Market%20Integration%20and%20Energy%20Demand%20Implication%20for%20East%20Asia.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LLC, vol. 9(1), pages 86-136, March.
    3. Jones, Donald W., 1991. "How urbanization affects energy-use in developing countries," Energy Policy, Elsevier, vol. 19(7), pages 621-630, September.
    4. Dargay, Joyce M. & Gately, Dermot, 2010. "World oil demand's shift toward faster growing and less price-responsive products and regions," Energy Policy, Elsevier, vol. 38(10), pages 6261-6277, October.
    5. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    6. repec:wbk:wbpubs:6014 is not listed on IDEAS
    7. Maddala, G S, et al, 1997. "Estimation of Short-Run and Long-Run Elasticities of Energy Demand from Panel Data Using Shrinkage Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 90-100, January.
    8. Garcia-Cerrutti, L. Miguel, 2000. "Estimating elasticities of residential energy demand from panel county data using dynamic random variables models with heteroskedastic and correlated error terms," Resource and Energy Economics, Elsevier, vol. 22(4), pages 355-366, October.
    9. Yu Sheng & Xunpeng Shi, . "Energy Market Integration and Economic Convergence: Implications for East Asia," Chapters,, Economic Research Institute for ASEAN and East Asia (ERIA).
    10. Lowe, Robert, 2003. "A theoretical analysis of price elasticity of energy demand in multi-stage energy conversion systems," Energy Policy, Elsevier, vol. 31(15), pages 1699-1704, December.
    11. Paul Brenton, 1997. "Estimates of the demand for energy using cross-country consumption data," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 851-859.
    12. Dahl, Carol & Sterner, Thomas, 1991. "Analysing gasoline demand elasticities: a survey," Energy Economics, Elsevier, vol. 13(3), pages 203-210, July.
    13. Ferguson, Ross & Wilkinson, William & Hill, Robert, 2000. "Electricity use and economic development," Energy Policy, Elsevier, vol. 28(13), pages 923-934, November.
    14. Karki, Shankar K. & Mann, Michael D. & Salehfar, Hossein, 2005. "Energy and environment in the ASEAN: challenges and opportunities," Energy Policy, Elsevier, vol. 33(4), pages 499-509, March.
    15. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    16. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    17. Yoo, S.-H., 2006. "The causal relationship between electricity consumption and economic growth in the ASEAN countries," Energy Policy, Elsevier, vol. 34(18), pages 3573-3582, December.
    18. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    19. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Widodo, Tri, 2016. "Comparative Advantage of Energy Products in the Midst of ASEAN Economic Integration," MPRA Paper 79964, University Library of Munich, Germany.
    2. Sheng, Yu & Shi, Xunpeng & Zhang, Dandan, 2014. "Economic growth, regional disparities and energy demand in China," Energy Policy, Elsevier, vol. 71(C), pages 31-39.
    3. Suthiphand Chirathivat & Kornkarun Cheewatrakoolpong, 2015. "Thailand's Economic Integration with Neighboring Countries and Possible Connectivity with South Asia," ADBI Working Papers 520, Asian Development Bank Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kostakis, Ioannis & Lolos, Sarantis & Sardianou, Eleni, 2021. "Residential natural gas demand: Assessing the evidence from Greece using pseudo-panels, 2012–2019," Energy Economics, Elsevier, vol. 99(C).
    2. Filippini, Massimo & Hirl, Bettina & Masiero, Giuliano, 2018. "Habits and rational behaviour in residential electricity demand," Resource and Energy Economics, Elsevier, vol. 52(C), pages 137-152.
    3. Massimo Filippini & Bettina Hirl & Giuliano Masiero, 2015. "Rational habits in residential electricity demand," IdEP Economic Papers 1506, USI Università della Svizzera italiana.
    4. Borice Augustin Ngounou & Honoré Tekam Oumbe & Bruno Emmanuel Ongo Nkoa & Edmond Noubissi Domguia, 2024. "Inclusive growth in the face of increasing urbanization: What experience for African countries?," Review of Development Economics, Wiley Blackwell, vol. 28(1), pages 34-70, February.
    5. Polemis, Michael L., 2016. "New evidence on the impact of structural reforms on electricity sector performance," Energy Policy, Elsevier, vol. 92(C), pages 420-431.
    6. Dong, Xiao-Ying & Hao, Yu, 2018. "Would income inequality affect electricity consumption? Evidence from China," Energy, Elsevier, vol. 142(C), pages 215-227.
    7. Fang, Wen Shwo & Miller, Stephen M. & Yeh, Chih-Chuan, 2012. "The effect of ESCOs on energy use," Energy Policy, Elsevier, vol. 51(C), pages 558-568.
    8. Peñasco, Cristina & del Río, Pablo & Romero-Jordán, Desiderio, 2017. "Gas and electricity demand in Spanish manufacturing industries: An analysis using homogeneous and heterogeneous estimators," Utilities Policy, Elsevier, vol. 45(C), pages 45-60.
    9. Shahbaz, Muhammad & Sarwar, Suleman & Chen, Wei & Malik, Muhammad Nasir, 2017. "Dynamics of electricity consumption, oil price and economic growth: Global perspective," Energy Policy, Elsevier, vol. 108(C), pages 256-270.
    10. Scott, K. Rebecca, "undated". "Demand and price volatility: rational habits in international gasoline demand," CUDARE Working Papers 121931, University of California, Berkeley, Department of Agricultural and Resource Economics.
    11. Barabas, György & Kitlinski, Tobias & Schmidt, Christoph M. & Schmidt, Torsten & Siemers, Lars-H. & Brilon, Werner, 2010. "Verkehrsinfrastrukturinvestitionen: Wachstumsaspekte im Rahmen einer gestaltenden Finanzpolitik. Endbericht - Januar 2010. Forschungsprojekt im Auftrag des Bundesministeriums der Finanzen. Projektnummer: 27/08," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72601.
    12. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
    13. Ghoddusi, Hamed & Morovati, Mohammad & Rafizadeh, Nima, 2019. "Foreign Exchange Shocks and Gasoline Consumption," Energy Economics, Elsevier, vol. 84(C).
    14. Mohcine Bakhat & José M. Labeaga & Xavier Labandeira & Xiral Lñpez, 2013. "Economic Crisis and Elasticities of Car Fuels: Evidence for Spain," Working Papers fa15-2013, Economics for Energy.
    15. Qusai Mohammad Qasim Alabed & Fathin Faizah Said & Zulkefly Abdul Karim & Mohd Azlan Shah Zaidi & Mohammed Daher Alshammary, 2021. "Energy–Growth Nexus in the MENA Region: A Dynamic Panel Threshold Estimation," Sustainability, MDPI, vol. 13(22), pages 1-18, November.
    16. Bakhat, Mohcine & Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "Elasticities of transport fuels at times of economic crisis: An empirical analysis for Spain," Energy Economics, Elsevier, vol. 68(S1), pages 66-80.
    17. Pock, Markus, 2010. "Gasoline demand in Europe: New insights," Energy Economics, Elsevier, vol. 32(1), pages 54-62, January.
    18. Jennifer Tobin & Susan Rose-Ackerman, 2011. "When BITs have some bite: The political-economic environment for bilateral investment treaties," The Review of International Organizations, Springer, vol. 6(1), pages 1-32, March.
    19. José Miguel Benavente & Alexander Galetovic & Ricardo Sanhueza & Pablo Serra, 2005. "Estimando la Demanda Residencial por Electricidad en Chile: El Consumo es Sensible al Precio," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 42(125), pages 31-61.
    20. Ikonen, Pasi, 2017. "Financial depth, debt, and growth," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number e51, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:era:chaptr:2011-rpr-17-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ranti Amelia The email address of this maintainer does not seem to be valid anymore. Please ask Ranti Amelia to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/eriadid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.