Price and income elasticity of demand for mineral commodities

This article utilizes the Divisia-moment approach to gauge price and income elasticity for seven major metals—steel, aluminum, copper, lead, nickel, tin, and zinc—in eight geographic regions—Africa, Asia, CIS, Europe, the Middle East, North and South America, Oceania—for the period of 1980–2015, and in the world for the period of 1960–2015. Based on various econometric techniques, this article presents new evidence of heterogeneous demand patterns across regions and metals. In particular, South America's per capita consumption of steel, aluminum and copper is the most price-elastic (− 0.18, − 0.27, and − 0.21, respectively). Other price-elastic regions are North America, Africa, Oceania, and Middle East with respect to nickel (− 0.22, − 0.46, − 0.23, and − 0.63, respectively) and CIS and Asia with respect to zinc (− 0.26 and − 0.14, respectively). This article also presents four extensions: measurement of price flexibility; use of instrumental variables to account for endogenous prices; price- and income-elasticity estimation by country; and, a characterization of mineral expenditure across geographic regions.