Discussion Paper

Urban Fuel Demand in Ethiopia: An Almost-Ideal Demand System Approach

Aug 23, 2010 | Zenebe Gebreegziabher, Arie J. Oskam, Demeke Bayou

This was created in partnership with Environment for Development .


This paper investigates the opportunities for reducing the pressure of urban centers on rural forest areas, using a dataset of 350 urban households in Tigrai in northern Ethiopia. We applied an almost-idealdemand system to fuels. Because the same fuels were not always used by households, the analysis started with a probit model of fuel use. The inverse Mills ratios derived from it were inserted into theestimation of the fuel demand system to obtain a full set of price and income elasticities. The results suggest that reducing the pressure of urban centers on local forests cannot be seen in isolation from broader development policies aimed at raising the level of education and income of the population. Higher income also stimulates the demand for fuel.