A micro‐level data analysis of household energy demand in Khyber Pakhtunkhwa, Pakistan: An application of linear approximate almost ideal demand system

Sajjad and Zia Ur Rahman

Growth and Change, 2021, vol. 52, issue 1, 518-538

Abstract: This study examines energy choice, consumption pattern and household energy expenditure in Khyber Pakhtunkhwa (KPK) using the Linear Approximate Almost Ideal Demand System (LA‐AIDS). The study used micro‐level data to estimate the price and expenditure elasticities by employing (SUR) methodology. Empirical findings showed that energy choice, consumption patterns, and demand are different for urban‐rural households in the province. Each household living in KPK spent 1838.81 Rupees (9.92%) on energy purchases out of its total average monthly expenditure of Rs. 18,542.79. Compared to urban households, households living in rural areas spend more on energy consumption in a proportionate manner. The expenditure elasticities estimated for all energy sources are positive and statistically significant. Furthermore, the result showed that expenditure elasticities estimated for urban and rural households are less than one, suggesting that all the sources of energy are necessities. Natural gas and electricity are the main energy sources for urban households, while firewood and electricity are key energy sources for rural households in the province. The study suggested that rural households need to switch from conventional energy sources to modern and renewable energy sources, which would reduce the cost of energy use.

Date: 2021
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