Review of the Relationship between Energy Intensity and Value Added in Iranian Agricultural Sector; New Evidence Based on Panel Vector Auto Regression Approach

Agriculture is considered as one of the important sectors in the process of growth and development. Hence, the study of the relationship between the value added of the agricultural sector and its determinants has been of interest to researchers and economic policy makers.

In this regard, the present study, using the Panel Vector Auto regression approach, reviewed the causal relationship between these variables in the Iranian provinces during the years 2005 -2015.

The analysis of the instantaneous response functions indicates a positive response of the energy consumption intensity to the value added shock, but the added value of the agricultural sector is negative in response to the energy consumption intensity impulse. Using variance analysis, a small amount of agricultural sector value added changes are explained by energy intensity. At the same time, value added has a greater relative contribution to energy intensity changes.

Therefore, it is recommended that investments be made to increase energy efficiency and productivity in order to make better use of energy in agriculture rather than policies based on quantitative reduction in energy consumption.