Functional forms in energy demand modeling

In the estimation of demand functions for energy resources, linear, log-linear and translog functional forms are commonly assumed. It has often been questioned whether such functional forms can indeed accurately represent the underlying relationships between the demand for various energy resources and explanatory variables such as energy prices, weather variables, income and other factors. This paper compares linear, log-linear and translog share equation functional forms against a non-parametric function. Bootstrapping methods are used to test the validity of using the three parametric functional forms in models of residential energy demand. Cross-sectional household-level data from the US BLS Consumption Expenditure survey and other government datasets are used. Each of the parametric functional forms tested performs poorly, suggesting that they may be insufficiently flexible to provide valid results in certain applications. (C) 2003 Elsevier Science B.V. All rights reserved.