Estimation of elasticities for domestic energy demand in Mozambique

In Mozambique, households consume a mix of energy sources to satisfy their needs for lighting and cooking and, for wealthier households, other domestic necessities such as refrigeration. The domestic energy mix depends on the prices of the sources and on the capability of the household to invest in the energy-consuming appliances required to satisfy those needs. Based on data from a household survey carried out in Mozambique during 2002/3 (IAF), this paper calculates the price and the income elasticities of demand for domestic energy, using an econometric method developed by Deaton. The calculations are made for all households at the national level, differentiating for urban and rural households, and for the northern households of Mozambique. In the econometric formulation, proxies for the ownership of energy appliances per household are used, allowing a simple evaluation of the effects of asset ownership on the demand for energy. Own- and cross-price elasticities for five individual domestic sources are obtained: low-grade sources such as firewood and charcoal are less elastic (elasticities of -0.41 and -0.28 respectively) than candles, kerosene and electricity (respectively -0.88, -0.79 and -0.60). Income elasticities are respectively 0.45, 0.32, 0.93, 0.84 and 0.69, placing firewood and charcoal as the less responsive to income variations and candles and kerosene as the most responsive. We also comment on the factors influencing domestic energy transition. (C) 2011 Elsevier B.V. All rights reserved.