Socioeconomic development and electricity consumption A cross-country analysis using the random coefficient method

Abstract

This paper analyses the relationship between electricity consumption and socioeconomic variables by estimating the electricity consumption function on the basis of single year cross-country data, and using OLS and random coefficient (RC) methods. The latter method yields both mean response as well as country-specific coefficients. While electricity consumption is found to rise with socioeconomic development, it is found to be inelastic with respect to changes in all the variables. The estimated country-specific coefficients with respect to per capita GNP and share of industry in GDP are found not to vary across countries, indicating that the impact of these variables on electricity consumption is similar across countries. On the other hand, the impact of other variables (years of schooling, GDP growth, urbanization and population density) is found to vary substantially across countries.