Estimating Price and Production Elasticities of Demand for Energy in Agriculture Sector Using an Error Correction ARDL Model

Energy in agricultural machinery and equipments is used as production input. The high consumption rate of growth of energy carrier in agriculture sector and wasting of energy carrier in this sector، are amongst the major reasons to conduct this research. In this paper، for determination of the effects of prices and the level of economy activities on demand for energy carrier in agriculture sector in the short – and long run، an error correction ARDL model has been designed. For this purpose، using the data of 1959-2008، the models have been estimated by ARDL approach. Results of estimated models revealed that price elasticity of demand for electricity and gas oil in agriculture sector are very low in short – and long run. Low price elasticity of demand for electricity and gas oil in agriculture sector shows that the fast rate of growth of consumption of these energy inputs in agriculture sector can not be controlled by pricing only. Therefore other effective methods must be used simultaneously for controlling their consumption.