Dynamic energy demand models with latent equipment

Our approach to energy demand modelling is based on a two-level dynamic analysis. In the short run we consider the stock of energy-using appliances as fixed. Only its intensity of use may change. However, in the long run this stock may vary. The short- and long-run demand equations are integrated into a single-equation dynamic model in which the equipment is ruled out. Our application to the demand for energy in Switzerland shows the power of this simple but flexible model which provides a thorough explanation of past behavior and a firm basis for the exploration of future demand evolution paths.     

Risk aversion,order strategy and price formation

Since goods classified as non-durable may, in fact, have a durable component, random-walk tests of the permanent income hypothesis using non-durable data series may yield incorrect results. This paper investigates this problem by first simulating a model of consumption to show the effects of durability on statistical tests of non-durable consumption models, and then by applying these tests to various disaggregated consumption series to determine the effect in practice. The paper finds that there are significant differences in the behaviour of the series within the non-durables and services catagories, and that these differences may be related to durability. The effect of this on standard tests of consumption is discussed.     

A DYNAMIC MODEL OF TOURISM, EMPLOYMENT AND WELFARE: THE CASE OF HONG KONG

Abstract.  The present paper uses a dynamic open-economy model with wage indexation to examine the impact of tourism on employment and welfare. Both short-run and long-run situations are analysed. It is well known that tourism converts non-traded goods into tradable goods. An increase in the demand for a non-traded good raises its relative price, which results in an expansion of the non-traded sector at the expense of the traded goods sector. This output shift raises labour employment in the short run. However, in the long run, the higher relative price leads to higher wages, resulting in a negative impact on labour employment. If the output effect is dominant, the expansion in tourism raises employment and welfare. However, under realistic conditions tourism may lower both labour employment and welfare due to rising costs. These results are demonstrated by simulating a dynamic model for the case of Hong Kong.     

Cointegration and common trends on the West German labour market

In this paper we analyze the West German labour market by means of a cointegrated structural VAR model. We find sensible stable long-run relationships that are interpreted as a labour demand, a wage setting and a goods market equilibrium. In order to study the dynamic behaviour of the model we identify two common trends that push unemployment. We find that goods market shocks have only transitory impacts on unemployment. In the long run, it is almost equally determined by technology and labour supply factors. However, transitory shocks have major importance in the shorter run since adjustment processes are rather sluggish. First version received: Sept. 1998/Final version accepted: Feb. 2000     

Advertising in demand systems: testing a Galbraithian hypothesis

In this paper we argue that the influence of advertising upon the inter-product distribution of demand is a system-wide phenomenon which is investigated better through a demand equation system rather than through single equation methods. Attention is focused upon a dynamic version of Deaton Muellbauer's AIDS model modified to include advertising terms. Within this framework using data on consumer's non-durable expenditure in the UK we carry out a preliminary test of Galbraith' hypothesis that advertising may affect the composition of aggregate consumer demand.     

The Timing of Purchases and Aggregate Fluctuations

We study the cyclical effects of the timing of durable goods purchases in a general equilibrium model in which both durable and non-durable goods are consumed and the durable good is lumpy. At the microeconomic level, the timing of durable goods purchases supplies some insulation for non-durable consumption over the cycle. At the macroeconomic level, the timing decisions tend to amplify and propagate wealth and income shocks. Our model also allows for endogenous price determination. When the price of the durable changes due to inflexibility of workers between sectors, the effect of adverse shocks is even stronger and longer.     

An evaluation of excess demand,actual cost and normal cost pricing hypotheses using non-nested tests

This paper has emperically analyzed three versions(zero lag,geometric lag and almon lag) of three price change hypotheses – namely the excess demand, actual cost and the normal cost hypothesis – the goal being to select the hypothesis that describes the underlying price dynamics for manufactured goods. The rival models are specified as non-nested alternatives and each version is estimated by using an efficient estimator. The traditional discrimination criteria which clearly reject the zero lag version, are found to be impotent in discriminating between the dynamic versions of the models. A sequential cross-evaluation of the two dynamic versions using both pairwise and multiple non-nested hypothesis tests proposed by Davidson and MacKinnon reveals a systematic domination by the almon version of normal cost pricing over both the excess demand and the actual cost pricing mechanisms in the Canadian manufacturing sector during the period 1961:1–87:4. This result is robust under alternative specifications of the desired stock of inventories for the excess demand model. The finding implies that short–run variations in demand conditions or in actual unit costs arising from temperoary changes in productivity may not paly a significant role in manufactured goods pricing decisions.     

收入水平与公共品需求结构关系探讨

在影响公共品需求结构的诸多因素中,收入水平的高低为最关键,收入水平与公共品需求结构有着直接的关系。按照需求弹性可将公共品分为高端产品、中端产品和低端产品三种类型。通过对收入水平不同群体的效用差异分析,推导出均衡公共品需求结构的形成与公共品收入扩展线。理论分析表明公共品需求结构随着收入增加而逐渐由低端产品向高端产品转移,并在一定经济水平出现拐点,从而为研究公共品的最佳供给结构提供了理论依据和基础。     

Substitution elasticities between durable and nondurable goods in the United States: New evidence from the dynamic Laurent system

This paper uses the dynamic Laurent demand system to jointly estimate the service flows from durable and nondurable goods. The parameter estimates are used to obtain the Morishima elasticity of substitution between goods for the United States from 1960:1 to 1991:4. One of the significant results of this study is that the Morishima elasticities of substitution vary over time instead of being constant. This result implies that the use of the CES functional form gives a poor approximation of the demand system for the data used in this paper. Another important result is that consumers adjust to their long-run equilibrium holding of consumption goods slowly rather than quickly.     

Modeling the rebound effect in two manufacturing industries

The rebound effect refers to the phenomenon that energy savings from improvements in energy efficiency are lower than expected due to unintended second-order effects. Grasping specific mechanisms related to the rebound effect requires a good understanding of interactions between heterogonous agents on multiple markets. Otherwise, policies aimed at reducing energy use may render counter-expected and unforeseen consequences. In this paper, we propose a formal model, where technological change results from interactions on two markets: between consumers and producers in the market for final goods, and heterogeneous power plants in the electricity market. The analysis provides insights to the role of technological change, supply–demand coevolution, and status-driven consumption in explaining the rebound effect. The model is employed to compare effectiveness of economic policies aimed at reducing carbon emissions associated with production of consumer goods, namely: a tax on electricity and ‘nuclear obligations’ to produce ten percent of electricity from nuclear energy.     

The micro-foundations of intertemporal price discrimination

Summary. This paper investigates the optimality of intertemporal price discrimination for a durable-good monopoly in a model where infinitely-lived households face an intertemporal budget constraint, and consume both durable goods and non-durable goods. We prove that the optimal price of the durable good is not constant, and may decrease or increase over time. Some households may choose to purchase the durable good at a later date, and pay lower or higher prices, since the gain in discounted utility of consuming more of the non-durable good more than compensates for the loss in utility from delaying the consumption of the durable good.Received: 12 March 2004, Revised: 7 January 2005, JEL Classification Numbers: D40, D42, D91.I would like to thank C.D. Aliprantis, the Editor, and an anonymous referee for their generous advice, and constructive comments and suggestions. I have also enjoyed discussions with John Quah on the subject. Research support from the Wharton-SMU Research Centre, Singapore Management University, is gratefully acknowledged.     

Short-Run and Long-Run Dynamics of Exchange Rates with Sticky Prices

This paper constructs microfoundations for the nexus between sticky goods prices and exchange rate overshooting. Based on an asset-pricing model, this paper describes how the exchange rate responds to a monetary shock in the short run and adjusts in later periods to a new long-run rate. In an environment where goods prices are sticky, the short-run response of the exchange rate to a monetary shock depends on the elasticity of consumption demand. The long-run exchange rate always shifts equiproportionately to a monetary shock regardless of the parameter values and is reached many periods after the shock.     

Forecasting demand for electricity in Maryland: An econometric approach

Most of the models for forecasting demand for energy are based on simple extrapolations of past trends or on a simple regression equation with price of the energy and the stock of appliances as explanatory variables. In this paper, an attempt has been made to derive static and dynamic multiple regression equations from economic theory of consumption and production (Section II). Historical data were fitted to these theoretical constructs to test the equations in terms of econometric theory and forecast the demand according to “higher order conditional interval forecasts”. The residential demand for electricity is a function of its price, price of its substitute, per capita income and a lagged demand variable for dynamic adjustment of actual demand to equilibrium demand for electricity. The forecasts of residential demand to 1990 are based on projections of exogenous variables such as residential price of electricity, per capita income and the estimated long run elasticity of demand (Section III). The nonresidential demand for electricity is a function of employment in that sector, sectoral prices of electricity and the lagged sectoral demand. The forecasts of nonresidential electricity demand are also based on projections of its independent variables (Section IV). The last section converts the total demand for electricity into the required generating capacities and juxtaposes them against the estimates of expected supplies available from the forecasts of the utilities. The paper concludes that the eighties will be faced with excess supply of electricity in Maryland, in case the assumptions of projections of independent variables hold good. The misallocation of resources inherent in such excess supplies could be avoided if realistic scenerios of future demand, as attempted in this paper, could be predicted.     

Income Distribution and the Demand Constraint

This paper argues thatthe interaction between inequality and the demand patterns forgoods is a potential source of persistent inequality. Incomedistribution, in the presence of non-homothetic preferences,affects the demand for goods and, due to differences in factorintensities across sectors, it alters the return to factors ofproduction and the initial distribution of income. Low inequalityleads to high demand for medium skilled intensive goods, providinga bridge over which low skill dynasties may transition to thehigh-skilled sector in the long run. Under high inequality however,the initial lack of demand for medium skilled labor breachesthis bridge from poverty to prosperity and inequality persists.     

The Plausibility of Agriculture-Led Development

Within the context of a simple dynamic general equilibrium framework, the model proposed in this paper formally characterizes the path in which a successful transformation in agriculture as a result of an improvement in agricultural technology can conceivably help some developing countries raise rural income, which in turn boosts effective demand for domestically produced, labor-intensive manufactured goods. Consequently, the price of nontraded manufactures goes up, leading to higher production in this sector, and subsequently higher wages. In the longer run, higher wage levels would result in larger aggregate savings, which in turn finances the economy's industrialization.     

Carbon tax simulations using a household demand model

The main objective of this paper is to analyse consumer response and welfare effects due to changes in energy or environmental policy. To achieve this objective we formulate and estimate an econometric model for non-durable consumer demand in Sweden that utilises micro- and macro-data. In the simulations, we consider two revenue neutral scenarios that both imply a doubling of the CO₂ tax; one that returns the revenues in the form of a lower VAT and one that subsidise public transport. One conclusion from the simulations is that the CO₂ tax has regional distribution effects, in the sense that household living in sparsely populated areas carry a larger share of the tax burden.     

Characteristics of mexican economic growth : Empirical testing of some latin american structuralist hypotheses

This article examines a series of hypotheses about the Latin American industrialization process put forward by the structuralist school of thought, using Mexico as a test case. In particular it examines the relationship between the distribution of income and associated patterns of consumption and industrial structure and its implications on demand-constraints, growth- constraints, employment constraint and multinational control. The results indicate that the modern-traditional dichotomy based on durable versus non-durable consumer goods is not the best way to examine this relationship since the consumption patterns for durable goods do not show a homogeneous behavior when distribution changes. Overall, it was found that growth and employment constraints and multinational control seem to get more exacerbated under greater inequality. With respect to the demand-constraints no definite conclusion can be made because of the mentioned heterogeneity in the response of durable goods to changes in distribution and the lack of information on relative excess capacity and/or dynamic linkages of the different sectors.     

Demand complementarities and cross‐country price differences

Empirical studies document that markups vary across destinations. This paper proposes a novel mechanism to explain variation in markups: consumers’ utility from final goods and services depends on their consumption of complementary goods and services. In countries with more complementary goods and services, consumer demand is less elastic, enabling monopolistically competitive firms to charge higher prices. The paper provides empirical evidence documenting a dependence of prices on demand complementarities.     

生物质能对化石能源的替代性——基于中国工业部门的实证分析

选取1987—2009年中国工业部门能源需求的时间序列数据,利用修正的AES模型和MES模型,实证研究了中国工业部门中生物质能对化石能源的内部替代问题。结果显示:中国对生物质能的需求量会随其自价格弹性的降低而增加;传统化石能源(石油、煤炭)的价格和需求量的同向变化表明,不能依靠价格诱导降低其需求,但价格诱导可促进生物质能对石油和煤炭等传统化石能源的替代。据此得出:中国的石油和煤炭两类化石能源呈现出"吉芬物品"或"低档物品"的特性,作为可再生能源之一的生物质能则表现出"正常物品"的特性;生物质能是传统化石能源的有效替代品。     

Durability choice with differentiated products

In a two-period setting we explore the impact of a related non-durable good or service on a monopolists’ choice of product durability. We show that a renting firm will provide the social efficient cost-minimizing durability independent of the related non-durable product. Thus Swan’s [Swan, P., 1970. Durability of consumption goods. American Economic Review 60, 884–894; Swan, P., 1971. The durability of goods and the regulation of monopoly. Bell Journal of Economics and Management Science 2, 347–357] market independence result can be extended to include durable goods renters that manufacture related non-durables. This finding, however, does not extend to sales markets. With sales, the monopolist will practice planned obsolescence (manufacture goods with uneconomically short lives). We find that planned obsolescence is maximized when the related output is highly complementary with the durable good. This indicates that in durable products markets, such as the electronics industry, public policies that encourage the adoption of complements for the durable may well lead to a less efficient durability choice.