Estimating Consumer Energy Demand Using International Data: Theoretical and Policy Implications*

Abstract

In this paper, consumer energy demand is estimated as part of a complete demand system using a consistent set of international data on prices and expenditures for 53 countries ranging from the poorest to the wealthiest. We compare three models: the Translog, the Deaton-Muellbauer Almost Ideal Demand System (DM), and the Generalized Logit (Logit), and two levels of commodity aggregation (6-good and 9-good). The estimation results indicate that the model specification and level of aggregation are important. The Logit model performs better than the Translog and D-M models which provide illogical elasticity estimates for many countries. The 9-good model shows that the demand for electricity is significantly more price and income elastic than the demand for primary energy.