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Industrialization and the demand for mineral commodities

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  • Stuermer, Martin

Abstract

This paper uses a new data set that begins in 1840 to investigate how industrialization affects the derived demand for mineral commodities. I establish that there is substantial heterogeneity in the long-run effect of manufacturing output on demand across five commodities. A one percent increase in per capita manufacturing output leads to an approximately 1.5 percent increase in aluminum demand and a roughly 1 percent rise in copper demand. Estimated elasticities for lead, tin, and zinc are below unity. My results suggest that the experience of Japan and South Korea’s industrialization, for example, may be used to infer the impact of China’s industrialization on future demand for metals. The results imply substantial differences across commodities with regard to future demand. Adjustment to equilibrium takes 7–13years, which helps explain the long duration of commodity price fluctuations.

Suggested Citation

  • Stuermer, Martin, 2017. "Industrialization and the demand for mineral commodities," Journal of International Money and Finance, Elsevier, vol. 76(C), pages 16-27.
    • Handle: RePEc:eee:jimfin:v:76:y:2017:i:c:p:16-27
    DOI: 10.1016/j.jimonfin.2017.04.006
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    More about this item

    Keywords

    Commodities; Non-renewable resources; Elasticity of demand; Non-homothetic preferences; Nonstationary heterogenous panel;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • N50 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - General, International, or Comparative

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