Investigating Factors Affecting Energy Intensity with Emphasis on Structural Break in Iran

Due to the importance of limited energy resources in the world, researchers and policy makers pay more attention to energy intensity. The purpose of the paper is to study the effect of structural break on factors influencing energy intensity in Iran during the period of 1979-2013. The Fully Modified Ordinary Least Squares (FMOLS) method was used to estimate co-integrating relationships among variables under study. The results showed that energy price and foreign direct investment had negative effects, and share of industrial value added had a significant positive effect on energy intensity. Then structural break was included in the model as a dummy variable. Findings indicate that 1987’s structural break has reduced the impact of energy price and industrial value added, which points to a decrease in the price elasticity of energy intensity and an increase in productivity of the industrial sector after structural break. However, such break had no significant effect on the relationship between direct foreign investment and energy intensity.