Jan Bentzen

Short- and long-run elasticities in energy demand: A cointegration approach

Abstract Short- and long-run energy demand elasticities are estimated on Danish annual data for 1948–1990. Energy consumption, the real price of energy and real GDP appear to be non-stationary variables. Cointegration and error-correction methods are therefore applied. All estimated parameters have the expected signs and magnitudes and no evidence is found of a structural break in energy demand caused by the increases in real energy prices since 1973/74.

Estimating the rebound effect in US manufacturing energy consumption

Abstract The energy price shocks of the 1970s are usually assumed to have increased the search for new energy saving technologies where eventual gains in energy efficiencies will reduce the real per unit price of energy services and hence, the consumption of energy will rise and partially offset the initial reduction in the usage of energy sources. This is the ‘rebound effect’, which is estimated for the US manufacturing sector using time series data applying the dynamic OLS method (DOLS). When allowing for asymmetric price effects the rebound effect is found to be approximately 24% for the US manufacturing sector.

A Revival of the Autoregressive Distributed Lag Model in Estimating Energy Demand Relationships

The findings in the recent energy economics literature that energy economic variables are non-stationary, have led to an implicit or explicit dismissal of the standard autoregressive distributed lag (ARDL) model in estimating energy demand relationships. Recent research, however, shows that the ARDL model remains valid when the underlying variables are non-stationary, provided the variables are cointegrated. In this paper, we use the ARDL approach to estimate a demand relationship for Danish residential energy consumption, and the ARDL estimates are compared to the estimates obtained using cointegration techniques and error-correction models (ECMs). It turns out that both quantitatively and qualitatively, the ARDL approach and the cointegration/ECM approach give very similar results.

An empirical analysis of gasoline demand in Denmark using cointegration techniques

Abstract Danish time-series data covering the period 1948–1991 are used in order to estimate short-run and long-run elasticities in gasoline demand. A cointegration test for a stable long-run relationship between the variables in the model proves to be positive, showing a smaller value of the long-run price elasticity than often quoted in empirical studies of gasoline demand. Finally, an error correction model is estimated.

Does OPEC influence crude oil prices? Testing for co-movements and causality between regional crude oil prices

Using high-frequency data the co-movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market. Time-series econometrics in the form of error-correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices – represented by Brent, OPEC and Texas (WTI) – are addressed. The empirical results are that causality is most likely bi-directional among these crude oil prices – and hence rejecting a regionalization hypothesis of the global oil market – and also an influence from the OPEC oil price towards Bent and WTI, which are usually claimed to have a benchmark role.

Rational Addiction and Alcohol Consumption: Evidence from the Nordic Countries

The purpose of this paper is to test Becker and Murphys (1988) rational addiction model on 35 years of time series data on alcohol consumption in each of the four Nordic countries: Denmark, Finland, Norway, and Sweden. The empirical relevance of rational addiction theory is assessed by examining the influence of past and future consumption and contemporaneous prices on current consumption. More precisely, the rational addiction model maintains that past and future consumption should have a positive effect and that current price should have the conventional negative effect on consumption. In addition, some parameter restrictions (regarding past and future prices and consumption) implied by rational addiction are tested. Finally, the own-price elasticities from rational addiction specifications are compared to those obtained from more conventional demand specifications which ignore addiction. Ignoring addiction may provide misleading estimates of the price sensitivity of alcohol consumption and this may, in turn, lead to underestimation of the effects of major changes in price policy such as those currently taking place in the Nordic countries.

What Drives the Demand for Temporary Agency Workers

As part of the general trend towards increased employment flexibility temporary agency employment has grown steadily in most European countries. The paper examines, first, whether the deregulation of temporary agency employment is responsible for the growth of the flexible staffing industry. Second, we investigate the cyclical behavior of temporary agency employment. Using monthly data for Germany, we show that the liberalization of the law regulating the sector is not the main reason for the surge of this employment form. Our analysis reveals, moreover, that temporary agency employment exhibits strong cyclical behavior and correlates with main economic indicators in real time.

Dynamic Modelling of Energy Demand: A Guided Tour Through the Jungle of Unit Roots and Cointegration

This paper provides a detailed survey of the recent literature on unit roots and cointegration, and relates the concepts to the estimation of energy demand relationships The special features and properties of non-stationary time-series are discussed, including the relevant asymptotic theory.

Regional income effects and renewable fuels : Increased usage of renewable energy sources in Danish rural areas and its impact on regional incomes

CO2 emission is a worldwide problem and in the attempt to reduce these emissions, renewable energy sources may be considered serious alternatives to the present usage of fossil fuels. As part of a research programme financed by the Danish Energy Agency, data concerning the different heating technologies based on oil and wood fuels have been collected. Private and social costs are estimated and these economic data are used when analysing regional income effects of increased consumption of fuels (e.g. wood) locally produced. The impacts on income and tax revenues are calculated from multiplier expressions, constructed with rights to the measurement of local effects.

Do expert ratings or economic models explain champagne prices

This analysis deals with the retail prices of champagne sold on the Scandinavian markets. The markets for champagne in these countries are rather small, of course, although the consumption of still wines has increased relatively fast during the last decades. A large number of French champagnes are available to the Scandinavian consumers, but there seems to be less price competition in the market concerning champagne as compared to still wine. The demand for champagne is most likely less price sensitive as it is usually perceived as a luxury good which to a large extent is bought on special occasions like weddings, New Years Evening, etc. Thus, the demand must be assumed to be price inelastic but of course the prices must be assumed to reflect the underlying quality of the champagnes. However, because champagne is bought with low frequency, many consumers do most likely not have/seek full information on the champagne. Some consumers rely on the reputation of particular brands, e.g. ‘Les Grandes Marques de Champagne’, some consumers choose to gain information from sensory rating of champagne, e.g. Robert Parker or Wine Spectator. In fact, the majority of champagne dealers use points given by Parker and/or Wine Spectator in their advertising of champagne. Accordingly the aim of this paper is to analyse the price formation of champagne prices on the Scandinavian markets, i.e. to what extent can prices be explained by the ratings of Robert Parker or Wine Spectator; or does a hedonic price function perform best? In order to address this question champagne prices at retail level in the Scandinavian countries have been collected along with a whole range of ‘quality attributes’ for these wines. Overall, the data set includes approximately 350 observations representing the main champagne producers and covering all 3 countries reasonably well. The main data sources are Vinmonopolet (Norway) and Systembolaget (Sweden). For Denmark the data are obtained from a whole range of wine merchants, supermarkets etc., as Denmark is a free market in contrast to the state regulations in Norway and Sweden. In order to estimate a hedonic price function a number of attributes like the grapes used, the vintage, indicators of sweetness, freshness etc. are included as far as such data are available. Furthermore, the quality assessments of professional wine experts are included from Robert Parker, Wine Spectator and the French ‘1855 Notation’ (1855.com), although, as expected, not all champagnes sold in Scandinavia are rated by the wine experts, who obviously only deal with the high-end segment.