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School of Business | Department of Economics | Economics | 2015
Thesis number: 14010
The relationship between pro-poor growth and residential demand for energy
Author: Keinänen, Janika
Title: The relationship between pro-poor growth and residential demand for energy
Year: 2015  Language: eng
Department: Department of Economics
Academic subject: Economics
Index terms: taloustieteet; economic science; energiatalous; energy economy; tasa-arvo; equality; kasvu; growth
Pages: 84
Key terms: development economics; energy; inequality; pro-poor growth
This thesis studies pro-poor growth's relation to residential energy demand. Relying on few previous country case studies and aggregate level panels, pro-poor growth is expected to increase energy demand explosively in contrast to pro-rich growth, also - and especially - in the residential sector. Given the contradictions in defining and measuring pro-poor growth, different measuring approaches of the concept will especially be paid attention to during the analysis. In the end, the findings of the residential level will be tied to aggregate level analyses by discussing the policy implications of the result. Since the general interest to consider income inequality in the context of energy demand has been low, cogitation on inequality's overall meaning is inevitable along the way.

The empirical analysis builds up from a careful consideration of the components that have previously led to the conclusion of pro-poor growth's positive contribution to energy demand. In the analysis several deficiencies in the past results were detected. As an endeavour to improve the understanding on the relationship between pro-poor growth and residential energy demand, a fixed effects panel data model of 79 countries over the period of 1980-2011 was eventually constructed. Since inequality statistics are collected irregularly and infrequently, linear interpolation and critical extrapolation were applied. Moreover, the data was found to include cross-sectional dependence, heteroscedasticity and serial correlation, which are all typical to large panels of over 20 years. Thus, Driscoll- Kraay standard errors were applied.

The analysis indicates that previous results have been strongly driven by upper middle-income countries, which utterly changes the interpretation. It would seem that energy demand only increases when countries are already at relatively high income levels, and not directly as the poor transfer to middle-income class. In addition, the past results seem to be highly sensitive to changes in the applied time period, method of measuring pro-poor growth as well as the selection of sample countries. This thesis, quite on the contrary, finds no unambiguous proof that pro-poor growth would be related to higher increases in residential energy demand.
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