Investigating the Convergence of Provincial Energy Efficiency in Iran: A Spatial Econometric Approach

Energy is one of the main production inputs, which indicates potential political and economic power in different countries. Due to higher energy prices, energy productivity is of special importance, and recent applied researches imply the effectiveness of energy productivity on economic growth. In addition, the process of regional economic growth is influenced by geographic conditions, regional and neighborhood specifications and functioning as well as usual regional economic variables including labor, capital, technology and energy. This paper estimates the effect of provincial energy productivity on provincial economic growth, using spatial econometric model and Maximum Likelihood method with applying provincial data from 2001 to 2011. In addition, it investigates β and σ convergence of energy productivity among Iran’s provinces. In spatial econometric method, we can consider the spillover effects and spatial relations among adjacent provinces with defining a distance-weight matrix between regions. Our findings indicate no σ convergence, but there is a conditional β convergence, which is a signal of existence of either spillover or neighborhood effect in provincial energy productivity growth. Meanwhile, the higher economic openness and lower government intervention in the economy improve energy productivity growth, but increasing energy price has no significant effect on the provincial energy productivity.