A stochastic frontier analysis approach for estimating energy demand and efficiency in the transport sector of Latin America and the Caribbean

Llorca, M.; Baños, J.; Somoza, J.; Arbués, P.

doi:10.5547/01956574.38.5.mllo

A stochastic frontier analysis approach for estimating energy demand and efficiency in the transport sector of Latin America and the Caribbean

Llorca, M.; Baños, J.; Somoza, J.; Arbués, P.

Authors

M. Llorca

J. Baños

J. Somoza

P. Arbués

Abstract

In this paper, a stochastic frontier analysis approach is applied to estimate energy demand functions in the transport sector. This approach allows us to obtain energy efficiency measures at country level that are a robust alternative to the energy intensity indicators commonly used for international comparisons. A transitive multilateral price index is constructed for aggregating the diverse energy components employed in the sector. Due to the likely unobserved heterogeneity among countries, the use of a random parameters model is proposed to accommodate these differences and to obtain different income and price elasticities per country. The estimated model is compared with alternative approaches of addressing this issue such as latent class, true fixed effects or true random effects models. This study is the first to use a random parameters stochastic frontier approach in the estimation of energy demand functions. The proposed procedure is applied to Latin America and the Caribbean, where the transport sector represents a large share of total energy consumption.

Citation

Llorca, M., Baños, J., Somoza, J., & Arbués, P. (2017). A stochastic frontier analysis approach for estimating energy demand and efficiency in the transport sector of Latin America and the Caribbean. The Energy Journal, 38(5), https://doi.org/10.5547/01956574.38.5.mllo

Journal Article Type	Article
Acceptance Date	Sep 20, 2016
Online Publication Date	Sep 1, 2017
Publication Date	Sep 1, 2017
Deposit Date	Oct 31, 2016
Publicly Available Date	Sep 1, 2020
Journal	Energy Journal
Print ISSN	0195-6574
Electronic ISSN	1944-9089
Publisher	International Association for Energy Economics
Peer Reviewed	Peer Reviewed
Volume	38
Issue	5
DOI	https://doi.org/10.5547/01956574.38.5.mllo
Public URL	https://durham-repository.worktribe.com/output/1373231