2021/05/19 by John Baffes, Alain Kabundi, Peter Nagle · 1 citation
Economics, Econometrics and Finance · Energy · #Energy, Environment, Economic Growth #Energy, Environment, and Transportation Policies #Market Dynamics and Volatility
paper · doi:10.1093/oep/gpab029
openalex publication_date 2021/05/19 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/22
Abstract We estimate income elasticities of demand for three energy and six base metal commodities and their group aggregates. The elasticities, which vary with income levels, are estimated using a panel autoregressive distributed lag model covering the period 1965–2017, for up to 63 countries. We report three findings. First, most income elasticities are inversely proportional to income and decline rapidly as income rises. This implies commodity demand growth slows as economies develop, consistent with the dematerialization hypothesis. At median per capita income levels, the elasticity for metals (in aggregate) was 0.9, while that of energy was 0.7. Second, there is significant heterogeneity between commodities, both in terms of income elasticities and in terms of the performance of the model, with larger commodities and group aggregates performing better. Finally, we find evidence of substitution between commodities (e.g. oil/coal, aluminum/copper), estimated by the inclusion of the prices of similar commodities.