Explaining variation in steel consumption in the OECD

• A fixed-effects panel model of steel consumption for 26 OECD countries was estimated.
• GDP is the main driver of steel consumption.
• Evidence was found of the “leapfrogging effect” of Hwang and Tilton (1990).
• The income elasticity of steel consumption is correlated with per capita GDP.

This paper examines the main drivers of intertemporal and cross-country variation in steel consumption using a fixed-effects panel model of 26 OECD countries over the period 1970–2012. The results indicate that per capita GDP is the main driver of steel consumption, however, investment spending, and the rates of industrialisation and urbanisation are also important determinants. Per capita steel consumption is found to be concave with respect to per capita GDP, suggesting that the growth rate in steel consumption slows as a country's level of economic development advances. Through the inclusion of a set of time dummy variables, there is evidence of the leapfrogging effect of Hwang and Tilton, 1990. Resour. Policy. 16(3), pp. 210–224, in which improvements in the efficiency of material use and material substitution reduced per capita steel consumption by around 1% per annum over the sample period, albeit mainly in the 1970s and 1980s. Finally, there is evidence of substantial cross-country variation in income elasticities, ranging from 0.01 for Norway to 4.05 for Greece, and these elasticities are related negatively to the countries' level of economic development.