The Role of Income and Substitution in Commodity Demand
This paper presents estimates of time-varying income elasticities of demand for energy and metal commodities. The analysis finds that the elasticities are close to unity, evaluated at world median per capita income levels. Furthermore, the estimate...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/433811579795110765/The-Role-of-Income-and-Substitution-in-Commodity-Demand http://hdl.handle.net/10986/33257 |
| Summary: | This paper presents estimates of
time-varying income elasticities of demand for energy and
metal commodities. The analysis finds that the elasticities
are close to unity, evaluated at world median per capita
income levels. Furthermore, the estimates confirm that as
income rises, demand growth for industrial commodities slows
and eventually plateaus. Indeed, estimates for aggregate
metals and energy differ by an order of magnitude throughout
the income spectrum: from a low of 0.2 for advanced
economies to nearly 2 for low-income countries. The
analysis, which accounts for substitutability by estimating
group aggregates as well as individual commodities with
cross-price effects, is based on a panel autoregressive
distributed lag model covering 1965-2018, for up to 63 countries. |
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