Estimating the Demand for Diesel in Agriculture Sector of Iran

International Journal of Energy Economics and Policy, 2015, vol. 5, issue 3, 660-667

Abstract: This paper estimates per capita demand for diesel by agricultural sector in Iran using auto-regressive distributed lags method over 1973-2012. The findings indicate that the demand for diesel is relatively inelastic in response to changes in its price, electricity acts as substitute input for diesel, diesel is a necessary input in agriculture, and mechanization index, despite having expected positive sign, fails to explain variations in diesel use. In addition, there is a long-run relationship among variables. According to error correction model, the speed of adjustment in short-run distortions towards longrun equilibrium is moderate. The findings show that government policy on cutting energy subsidies is not enough for reducing diesel consumption in Iranian agricultural sector. Thus, non-price measures such as innovations in inter-fuel substitution technologies and applying efficient machineries are recommended to manage energy uses in agriculture.

Keywords: Demand; Price; Diesel; Electricity; Auto-Regressive Distributed Lags (search for similar items in EconPapers)
JEL-codes: C51 Q16 Q41 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2015-03-03

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