Does economic progress and electricity price induce electricity demand: A new appraisal in context of Tunisia

• Published date: 01 February 2022
• Author: Besma Talbi,Mehdi Ben Jebli,Muhammad Farhan Bashir,Umer Shahzad
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2379

ACADEMIC PAPER

Does economic progress and electricity price induce electricity

demand: A new appraisal in context of Tunisia

Besma Talbi

1

| Mehdi Ben Jebli

2,3

| Muhammad Farhan Bashir

4

| Umer Shahzad

5

1

Polytechnic School of Tunisia, University of

Carthage, Carthage, Tunisia

2

FSJEG Jendouba, University of Jendouba,

Jendouba, Jendouba Governorate, Tunisia

3

QUARG UR17ES26, ESCT Campus,

University of Manouba, Manouba, Manouba

Governorate, Tunisia

4

School of Business, Central South University,

Changsha, Hunan, China

5

School of Statistics and Applied Mathematics,

Anhui University of Finance and Economics,

Bengbu, Anhui, China

Correspondence

Muhammad Farhan Bashir, School of Business,

Central South University, Changsha 410083,

Hunan, China.

Email: farhan.paks89@gmail.com; farhan.

paks@csu.edu.cn

This article discusses the residential electricity (RE) demand in Tunisia as a function

of household disposable real Gross Domestic Product (GDP), the price of electricity

(PE) and the degree of urbanization (U) spanning the period 1980–2018. To do that,

the Autoregressive Distributed Lag (ARDL) bound model and Granger causality test

are employed to examine the influencing factors of the changes in RE demand, and

to discuss the directions of short and long-run causalities among the variables. The

empirical result shows that all variables are integrated of order one, I (1). The Fisher

statistics of the Wald test confirms that variables are cointegrated. Long-run elastici-

ties suggest that, in the long-run, electricity price and urbanization have a significant

and positive impact on RE demand, while real GDP contributes insignificantly to the

decrease of RE demand in Tunisia. Granger causality empirics suggests that in short

run, there is bidirectional causality between RE demand and electricity price, and

between RE demand and urbanization, and a unidirectional causality from real GDP

and urbanization to electricity price, and from real GDP to urbanization.

1|INTRODUCTION

Industrial revolution in the post-World War II period gave rise energy

demand and by year 2035 is expected to rise one-third (Mikayilov,

Hasanov, Olagunju, & Al-Shehri, 2020). Energy demand can be divided

into industrial, residential, commercial and transportation as major

sectors. Furthermore, energy demand in each sector is critical in

developing power policies in developing economies such as Tunisia.

Amongst major consumption areas, residential sector is the major sec-

tor for energy consumption and is directly affects the financial deci-

sion making of individual household (Durmaz, Pommeret, &

Tastan, 2020). One of major reasons for higher energy demand in

energy sector is directed towards cooling and heating systems in resi-

dential buildings (Isaac & Van Vuuren, 2009) and in turn because

of these residential buildings are also most significant contributors

of carbon emissions (Bashir et al 2015; Javid, Nejat, & Hayhoe, 2014).

The proportion of energy consumption of total energy demand varies

between 16 and 50%, with 30% as average energy consumption of

worldwide energy demand (Chastas, Theodosiou, Kontoleon, &

Bikas, 2018; Zhang, Yan, Hu, & Guo, 2019) Canada, Mexico, United

States, and Chile consuming one-fourth of residential energy

consumption and the United States residential sector is the biggest

individual contributor (Chatellier Lorentzen & McNeil, 2020).

The Tunisian energy consumption varies from neighboring coun-

tries because of economic, industrial, and residential characteristics.

Furthermore, higher proportion of urban population means higher

energy consumption than other emerging economies in the region

where energy prices and demographic characteristics are critical in

shaping energy consumption patterns (Labidi & Abdessalem, 2018;

Longhi, 2015). It is important to know income elasticity and energy

prices to understand energy demand for each country that is,

increased income results in higher spending on energy consumption in

emerging economies. Also, low proportion of old building also means

lower energy consumption as newly built construction sites focus on

energy efficiency (Lee, Kaneko, & Sharifi, 2020; Xu, Xiao, & Li, 2020).

Finally, climate indicators play an important role in residential demand

for energy consumption (Chen, Ban-Weiss, & Sanders, 2018; Pablo-

Romero, Pozo-Barajas, & Sánchez-Rivas, 2019). As already supported

by existing literature, countries with warm weather require energy for

air conditioning and countries with cooler weather consume energy

for heating purposes (Kaivo-oja, Vehmas, & Luukkanen, 2016; Ran-

dazzo, De Cian, & Mistry, 2020; Yalcintas & Kaya, 2017). Hence,

Received: 6 August 2020 Accepted: 9 August 2020

DOI: 10.1002/pa.2379

J Public Affairs. 2022;22:e2379. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of10

https://doi.org/10.1002/pa.2379