Price and Income Elasticities of Residential Demand for Electricity in Jordan: An ARDL Bounds Testing Approach to Cointegration

Sameh Ajlouni

Abstract


This paper seeks to provide short- and long-run estimates of price and income elasticities of demand for electricity by the residential sector in Jordan using the ARDL (bounds testing) approach to cointegration over the period 1980-2013. The long run estimates were highly significant and had the expected signs. In the short-run all estimates had the correct signs and were highly significant except for the price elasticity. As expected, the short run elasticities were smaller, in absolute terms, than their counterparts in the long run. Whether in the short run or the long run, the demand is more responsive to income than it is to price. Therefore, price policies are not highly effective in changing the consumption behaviour of the households. The demand for electricity is affected by changes in weather conditions. However, in the long-run the demand for electricity for cooling is more elastic than is the demand for heating purposes.

Keywords


Electricity, ARDL, Heating and Cooling Degree Days, Elasticity.

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