Abstract
The prime objective of this study is to estimate the underlying determinants of electricity demand and provide sectoral income and price elasticities for Pakistan using panel data from 1973 to 2012. These estimates are important for calculating welfare and environmental implications of present and upcoming energy policies. The panel Cointegration technique has been applied for testing long run relationship between variables. Long run panel and sector specific parameters have been estimated using fully modified OLS (FMOLS) method. Results suggest that income and price elasticities are significant in both panel and sector specific models. Income elasticities demonstrate that electricity acts as a necessity in overall and as a luxury in different economic sectors. Price elasticities are less than unity, which means that electricity demand is less responsive to price changes in the economy and the sectoral level.
Keyword(s)
Long Run, Sectoral Determinants, Electricity Demand, Pakistan, Panel Data Assessment