Abstract
In the present paper, an investigation into Thailand’s energy demand is performed to determine if: (1) a linear or nonlinear Engel curve better explains the relationship between income and energy consumption, and (2) systems with pre-commitments better model energy consumptions. Four demand systems are estimated: an almost ideal demand system (AIDS), the quadratic almost ideal demand system (QAIDS), generalized almost ideal demand system (GAIDS), and the generalized quadratic almost ideal demand system (GQAIDS). Elasticities are calculated for policy implications. The empirical results suggest that models considering pre-commitments and nonlinear Engel curves may be slightly more appropriate for Thailand’s energy system, from both statistic and economic standpoints. Statistical inferences appear to favor the GQAIDS model based on the encompassing results. Economic reasonability also appears to favor the GQAIDS model, in particular, petroleum products, as it provides results consistent with the notions of precommitments and fuel substitutability found in previous studies. Most of the previous studies in various forms have shown that the demand for petroleum products is relatively inelastic to price in Thailand. The current study, however, finds that own-price elasticities of uncompensated demand for petroleum products are almost unitary, which is relatively more elastic than most of the previous studies. As such, further studies are required and the price-based policy on petroleum products targeting the reduction in petroleum product dependence must be implemented with caution.
Highlights
Energy consumption is a key indicator of economic growth, in industrialized/developed countries and in developing countries
To determine if the Engel curve maybe nonlinear, quadratic models were compared to linear models, quadratic almost ideal demand system (QAIDS) to almost ideal demand system (AIDS) and generalized quadratic almost ideal demand system (GQAIDS) to generalized almost ideal demand system (GAIDS)
The adjusted R-squared for the natural gas equation is slightly larger in the QAIDS (AIDS) than the AIDS (QAIDS) model
Summary
Energy consumption is a key indicator of economic growth, in industrialized/developed countries and in developing countries. Energy consumption has been increasing over time, short run energy consumption levels only deviate slightly, despite the fluctuations in energy prices. Energy consumers, by their choice of, for example, technology, appliances, and transportation modes, commit to using a fixed amount of energy in the short run, regardless of their work and residential locations. Such consumption levels that are irresponsive to price are considered as pre-commitments [5]. In response to energy prices, energy consumers can alter or move manufacturing production, add insulation, and purchase more energy efficient appliances
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
