The effect of urbanization and industrialization on energy efficiency in the provinces of Iran: The spatial econometric approach

Increasing energy efficiency is an effective policy to reduce the negative externality of economic development. The study estimates and evaluates the factors affecting energy efficiency by using the data at the provincial level in Iran over a period from 2006 to 2015. The results of the stochastic frontier approach show that Bushehr and Ilam provinces have the highest and the lowest rate of efficiency equal to 0.41 and 0.16 respectively. The results of the spatial econometrics show that there is a positive spillover effect among the provinces in terms of energy efficiency. Also, the direct effects of industrialization and population density on energy efficiency are positive, but its spillover effect is negative. As another finding, the direct effects of urbanization and per capita income are negative, but the spillover effect of urbanization is positive and significant.