Working Paper: NBER ID: w19092
Authors: Paul Gertler; Orie Shelef; Catherine Wolfram; Alan Fuchs
Abstract: Most of the future growth in energy use is forecast to come from the developing world. Understanding the likely pace and specific location of this growth is essential to inform decisions about energy infrastructure investments and to improve greenhouse gas emissions forecasts. We argue that countries with pro-poor economic growth will experience larger increases in energy demand than countries where growth is more regressive. When poor households' incomes go up, their energy demand increases along the extensive margin as they buy energy-using assets for the first time. We also argue that the speed at which households come out of poverty affects their asset purchase decisions. \n\nWe provide empirical support for these hypotheses by examining the causal impact of increases in household income on asset accumulation and energy use in the context of Mexico's conditional cash transfer program. We find that transfers had a large effect on asset accumulation among the low-income program beneficiaries, and the effect is greater when the cash is transferred over a shorter time period. We apply lessons from the household analysis to aggregate energy forecast models using country-level panel data. Our results suggest that existing forecasts could grossly underestimate future energy use in the developing world.
Keywords: Energy Demand; Poverty Alleviation; Conditional Cash Transfers; Asset Accumulation; Household Energy Use
JEL Codes: Q41; Q47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income growth (O49) | energy demand (Q41) |
| speed at which households come out of poverty (I32) | greater demand for energy (Q41) |
| income elasticity of energy demand is nearly double in countries with propoor growth (Q43) | energy consumption (Q41) |
| increases in household income (D19) | energy consumption (Q41) |
| significant increases in asset ownership (D14) | greater demand for energy as households acquire energy-using assets like refrigerators (D19) |
| increases in household income due to cash transfers from the Oportunidades program (H53) | significant increases in asset ownership (D14) |