Investigating Asymmetry of Prices and Productivity of Energy Carriers in Iran’s Agricultural Sector

Abstract

Energy carriers are one of the most important inputs in the agricultural sector. These inputs have been the foundation of the development and transition of the agricultural sector from the traditional stage to the industrial stage. The energy per capita marginal consumption in Iran's agricultural sector is 3.2 times greater than its global average. Therefore, it is essential to save and optimally use energy carriers in this sector. Price liberalization is known as the most important pricing tool. The present study analyzes the effect of the prices of energy carriers on the productivity of their consumption in the agricultural sector by using the hidden cointegration method. The results show that the productivity of electricity and oil products display an asymmetric behavior in response to energy price variations so that electricity productivity decreases by 1145.04 units as the prices of electricity carriers rise and increases by 1254.32 units when the prices of electricity decrease. Also, when the price of oil products increases, productivity shows an increase of 22.18 units. In addition, the productivity of oil product carriers is improved by increasing their prices. Therefore, price correction is inevitable in the energy carrier sector. Given the asymmetric effect of the price of electricity on its productivity, the type of electricity price correction process should be considered along with non-price policies. The pricing tool only provides an incentive for productivity growth through the substitution of production factors. Given these conditions, if there is no economic structure and facilities to improve productivity, it cannot be expected that the pattern of energy consumption is corrected.