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Abstract

This study examines the pattern of household energy consumption among urban, rural and estate sectors, over time and across income groups in Sri Lanka. The ‘energy ladder’ hypothesis was tested and Engle functions were estimated using Consumer Finances and Socio Economic Survey data from 1978/79 to 2003/04. Results reveal that the energy ladder hypothesis holds for Sri Lanka and the country as a whole is moving towards modern fuels such as liquefied petroleum gas (LPG) and electricity. The urban sector proceeds much faster than the rural sector. Engle functions estimated for individual fuels and for different sectors reveal that the budget elasticity values were negative for firewood and kerosene, in the urban and estate sectors, indicating that they are inferior goods. LPG and electricity had positive budget elasticities indicating that they are normal goods. Budget elasticities estimated for the estate sector were insignificant eliciting that factors other than income influence the fuel consumption decisions.

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