Analysis of Relationship between Energy Intensity and Income Per Capita: A Comparative Study on Ten Asia Pacific Countries

Written by indra

Tuesday, 28 July 2009 10:15

indra_ Energy availability and consumption play an important and strategic role in generating economic growth. One common measurement used in analyzing energy-GDP relationship is energy intensity, which is the amount of energy required to produce a unit of income (GDP). This research examines relationship between energy intensity and income per capita for ten Asia Pacific countries with various economic performances over the period of 1980-2005. Using static and dynamic panel data models, energy consumption and energy intensity are expressed as quadratic logarithmic function of income per capita, squared income per capita, and energy price. As a result, the long run coefficient of income per capita is greater than one and the long run coefficient of squared income per capita is negative. It describes that energy intensity has quadratic relationship with income per capita, and indicating a change in trend of energy intensity. This research also analyzes responses of energy consumption and energy intensity to the change of energy price and income per capita in both the short run and long run. The price elasticity is negative and very inelastic; it means the response of energy consumption with respect to the change in energy price is relatively low. However, the estimation results are also show that the income elasticity is positive but tends to decrease slightly over time. Here, the estimated value of income elasticity varies across countries where the high income countries have lower elasticities than those of the middle-low income countries.