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Industrialization and the demand for mineral commodities

  • Martin Stuermer

What drives the long-term demand for mineral commodities? This paper provides empirical evidence on the long-run demand for mineral commodities since 1840. I extend the partial adjustment model to account for country-specific structures and technological change. I find that a one percent increase in manufacturing output leads to a 1.5 percent increase in the demand for aluminum and a one percent increase in the demand for copper. The estimated manufacturing output elasticities of demand for lead, tin, and zinc are far below one. The estimated price elasticities of demand are highly inelastic for all mineral commodities in the long run. My results suggest that industrialization in China, for example, will cause the consumption of aluminum and copper to increase at a considerably higher rate than the one of lead, tin, and zinc. All variables adjust slowly to equilibrium, which helps to explain the extended fluctuation in these markets.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse13_2013.pdf
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse13_2013.

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Length: 95
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:bon:bonedp:bgse13_2013
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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