Theoretical and Applied Economics (Mar 2022)
Long-term price and income elasticity of residential natural gas demand in Turkey
Abstract
The aim of this study is to estimate the price and income elasticity of long-term residential natural gas demand. The variables of the econometric model created within this scope are the natural gas consumption of the residential sector, the price of natural gas, the real income per capita, the price of electricity, the heating degree-days indicating the climatic conditions and urbanization rate. This study analyzes Turkey’s long-term demand for natural gas in the residential sector during the 1990-2019 period using the methods of ARDL bound test, Full Corrected ordinary least squares and Canonical Cointegration Regression. Based on the analyses, the price of natural gas and income had a significant negative effect, while the price of electricity, climate, and urbanization rate respectively had a significant positive effect on long-term natural gas demand. In the long term, both price and income elasticity of natural gas demand are estimated to be bigger than 1. The results of this study show that in the residential sector of Turkey, natural gas is an inferior good. It was also found that housing sector electricity consumption is a substitute good for housing sector natural gas consumption.
