Decomposition of the Gap of Household Electricity Expenditure Using Blinder–Oaxaca and Machado-Mata Decomposition Models

Document Type : Research Article

Authors

1 Ph.D. Candidate in Economics, Department of Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran.

2 Associate Professor, Department of Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran

Abstract

The efficient use of electricity in the household sector to ensure maximum welfare of households and supply of electricity required by industry as an engine of economic growth is the important goal of countries. Therefore, reducing the inefficiency of energy consumption by households is of high importance. The present study uses statistical evidence of expenditure-income of Iranian households for the period 2010–2021 to estimate the share of energy inefficiency in the households’ energy consumption differences. The results of Blinder–Oaxaca decomposition show that the share of inefficiency in creating a gap in the share of household electricity costs has decreased from 87.2% in 2010 to 76.5% in 2021. The results of Machado-Mata decomposition show that in the upper quantiles of the share of electricity consumption, the share of the difference in the socio-economic characteristics of households is more than that of the lower quantiles and this share has increased in 2021 as compared to 2010. Therefore, the role of household consumption pattern is more than the rate of access to high-energy appliances, so providing a step-by-step pricing system with an exponential rate for electricity consumption is an effective policy to reduce inefficiency in electricity consumption. Furthermore, quantile regression estimation shows that household income and size have a negative effect, and ownership and size of housing and access to household appliances have a positive significant effect on the share of household electricity costs.

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References

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Journal of Applied Economics Studies in Iran
Volume 11, Issue 44
English
March 2023
Pages 81-101

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