Energy consumption and economic activity in industrialized countries. The dynamic aggregate time series relationship

Most econometric studies suggest that the income elasticity of demand for energy is approximately unity. For the developed market economies it is shown that over the period 1950-1978 the long-run income elasticity is substantially higher than unity in terms of a CES energy demand function. This result reflects the application of a generalized dynamic estimation methodology where serial correlation is regarded as a diagnostic guide to distributed lag fitting. Price elasticities are also estimated but these are in line with conventional estimates.