Residential Electricity Demand in Mexico: A Model Distinguishing Access from Consumption

A principal finding of this paper is that, for a developing country like Mexico, increases in income have an important double-whammy impact on electricity consumption - first in terms of increasing the number of households hooked-up to electricity services, and second in terms of increasing the consumption of households already having access to electricity. While each of the components has estimated long-run income elasticity values of less than unity, their joint effect has been estimated to be considerably larger than one. The authors feel this structural distinction between access and consumption helps in understanding and making more credible the large reduced form residential-energy income elasticity estimates for developing countries that have been reported in the literature. One empirical result requiring further investigation is why own-price elasticity estimates are smaller (in absolute value) with the pooled regional, time-series data than with the aggregate time-series data. Finally, the authors found that, on empirical grounds, there is a clear preference for results based on the logistic electricity hook-up specification. Since this specification is also preferable intuitively, they suggest its use be extended in future studies of electricity demand in developing countries.