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The structure of consumer energy demand in Australia: an application of a dynamic almost ideal demand system

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  • Muhammad, Akmal

Abstract

By parameterising the Almost Ideal (AI) demand system as a vector error correction model (VECM), this paper estimates the structure of consumer energy demand in Australia. To this end, domestic per person expenditure on energy is divided into the expenditure on electricity, gas and a miscellaneous category, residual fuels. To close the system, non-energy household consumption expenditure is introduced, resulting in a four-equation share system, which is estimated using national-level quarterly data. The demand for electricity and gas is price and income inelastic whereas that of other fuels is highly price elastic. Significant substitution possibilities are found between electricity and other fuels and between gas and other fuels. However, electricity and gas – which, together, account for more than 90 per cent of household fuel expenditure – are estimated to be complementary fuels.

Suggested Citation

  • Muhammad, Akmal, 2002. "The structure of consumer energy demand in Australia: an application of a dynamic almost ideal demand system," 2002 Conference (46th), February 13-15, 2002, Canberra 125050, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare02:125050
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    References listed on IDEAS

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    1. Goldschmidt, Peter, 1988. "Domestic appliance energy usage in Western Australia," Energy Economics, Elsevier, vol. 10(2), pages 155-162, April.
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    3. Robert Bartels & G. Fiebig, 1990. "Integrating Direct Metering and Conditional Demand Analysis for Estimating End-Use Loads," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 79-98.
    4. Fiebig, Denzil G. & Bartels, Robert & Aigner, Dennis J., 1991. "A random coefficient approach to the estimation of residential end-use load profiles," Journal of Econometrics, Elsevier, vol. 50(3), pages 297-327, December.
    5. Hawkins, R G, 1975. "The Demand for Electricity: A Cross-section Study of New South Wales and the Australian Capital Territory," The Economic Record, The Economic Society of Australia, vol. 51(133), pages 1-18, March.
    6. Robert Bartels & Denzil G. Fiebig, 2000. "Residential End-Use Electricity Demand: Results from a Designed Experiment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 51-81.
    7. David L. Ryan & Yu Wang & Andre Plourde, 1996. "Asymmetric Price Responses of Residential Energy Demand in Ontario," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 317-323, April.
    8. Dumagan, Jesus C. & Mount, Timothy D., 1993. "Welfare effects of improving end-use efficiency: Theory and application to residential electricity demand," Resource and Energy Economics, Elsevier, vol. 15(2), pages 175-201, June.
    9. Robert Bartels & Denzil G. Fiebig & Michael H. Plumb, 1996. "Gas or Electricity, which is Cheaper? An Econometric Approach with Application to Australian Expenditure Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 33-58.
    10. Bartels, Robert & Fiebig, Denzil G & Nahm, Daehoon, 1996. "Regional End-Use Gas Demand in Australia," The Economic Record, The Economic Society of Australia, vol. 72(219), pages 319-331, December.
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