An Investigation of the Causes of Electricity Expenditure Gap in Urban-Rural Households in Iran

Employing micro-data, quantile regression, as well as Oaxaca-Blinder and Machado-Mata decomposition models, this study investigated the causes of the existing gap in electricity consumption of the Iranian rural/urban households from 2010 to 2018. The quantile regression analysis showed that income and size of the family have a significant reverse effect on the amounts of energy expenditure. However, the building characteristics and access to high electricity-consuming appliances have a significant impact on the amounts of energy expenditure. In addition, the Oaxaca-Blinder model showed that 92% of the gap in the electricity expenditures of the urban/rural households is due to differences in socio-economic characteristics of the households. The Machado-Mata model also showed that in areas with lower electricity expenditures, inefficiency in electricity consumption is more effective compared to the difference in the socio-economic characteristics of the households. Since the households’ access to high electricity-consuming appliances has a significant effect on the gap in their electricity expenditures, the main reason for the increase of electricity consumption in Iran is the desire to achieve a higher level of welfare.