Xabier Palacio Eraso

Let's Get Rich to Save Energy: an Inverted "U-relationship" Between Electricity Consumption and Income Xabier Palacio Eraso

This paper studies the relationship between electricity consumption per person and income (measured as GDP per capita in Current US$ and GNI per capita in PPP). It follows the latest methodology researched in the literature and tests for distribution equality, correlation, outlier detection, fixed effects and the addition of new variables. An inverted U-relationship could be found for GNI per capita in all the tests, but not for GDP per capita in all specifications. Data was subject to outlier detection and adjustments for fixed effects for both cross-section and period. Furthermore alternative specifications were analyzed, illustrating how the inverted U- relationship can be explained with the addition of GNI per capita into the general model up to the fourth power without losing its shape, showing a turning point in electricity consumption at a level of $38,630, with a 95% confidence interval of ±$123.