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Economic Development and the Structure of the Demand for Commercial Energy

Ruth A. Judson, Richard Schmalensee, and Thomas M. Stoker

January 1998

Ruth A. Judson, Richard Schmalensee, and Thomas M. Stoker, January, 1998

To deepen the understanding of the relation between economic development and energy demand, this study estimates the Engel curves that relate per-capita energy consumption in major economic sectors to per-capita GDP. Panel data covering up to 123 nations are employed, and measurement problems are treated both in dataset construction and in estimation. Time and country fixed effects are assumed, and flexible forms for income effect are employed. There are substantial differences among sectors in the structure of country, time, and income effects. In particular, the household sector\'s share of aggregate energy consumption tends to fall with income, the share of transportation tends to rise, and the share of industry follows an inverse-U pattern.

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