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Smart Edward AmanfoGraduate School of Global Environmental Studies
Sophia UniversityTokyo, Japan
A Microeconometric Analysis of Household Energy Consumption:Evidence from Ghana Household Living Standard Survey and Sustainability Implications
November 6, 2019
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Outline:
1 IntroductionBackgroundHousehold energy consumption
2 MethodologyData sampling strategyHousehold energy choice theoryEstimation Models
3 Empirical findingsDeterminants of household energy choiceDeterminants of household energy consumption dependency
4 Conclusions and sustainability implications
5 References
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Introduction
Background and Trends
• Ghana attained a Lower-Middle-Income status in 2011 based on the World Bank’s WorldBank $1,006 to $3,975 per capita threshold (Huq and Tribe, 2018).
• Ghana joined oil exporting countries in 2011 (Huq and Tribe, 2018).
• Over 70% of total primary energy supply (TPES) comes from woodfuels, representing about60% of the final energy demand (GoG, 2015) .
• Between 2001 to 2018, Ghana lost about 1.09Mha of tree cover, representing a 16%decrease in tree cover due to deforestation, and 29Mt of carbon dioxide emissionsa
• Seven regions of Ghana were responsible for about 72% of all tree cover lost between 2001
and 2018, with the Upper West Region alone contributing 97% relative to the 330%
national average.
• Ghana’s annual deforestation rate is 3% (GoG, 2015)
• Household indoor pollution was responsible for 11,500 premature deaths in Ghana in 2018.
• These deaths are projected to grow in the near future, to about 13,820 deaths annually !b
aSource: Global Forest Watch databasebISSER and others, 2018.
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IntroductionHousehold energy choices by carriers
Figure 1: Distribution of households by energy carries
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IntroductionSpatial view of household energy choices
Figure 2: Distribution of households energy consumption carries by the ecological zones/locations
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How would economists think by observing these trends?
Motivation
Figure 3: BOULDING, Kenneth Ewart.Born on 18 January 1910 in Liverpool, England.Died 19 March 1993 in Boulder, Colorado
⇒
Man is finally going to have to face thefact that he is a biological system livingin an ecological system, and that hissurvival power is going to depend onhis developing symbiotic relationshipsof a closed-cycle character with all theother elements and populations of theworld of ecological systems
(Boulding, 1956)
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MethodologyData sampling strategy
Data • Use data from Ghana Living Standard Survey Round Seven 2016/7 (GLSS7, 2016/7) for the ten1 administrative regions of Ghana• Survey conducted by Ghana Statistical Service with support from World
Bank.• 15000 households in 1,000 Enumeration Areas (EAs)• 561 of rural EAs (56.1%) and 439 urban EAs (43.9%).
1Currently, Ghana has 16 regions–previous ten region re-partitioned
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MethodologyTheories and empirical strategies
Household energy choice theories
1 The energy ladder theory (Energy Transition Theory)⇒ Household transits to clean carriesas incomes increases (Hosier and Dowd, 1987, Johansson et al., 2012)
2 Fuel Stacking Theory (Household use multiple sources of energy) (yo Cheng and Urpelainen,2014).
Unordered Choice Theory– Applied to household energy choices
1 Additive-Random Utility (Colin and Trivedi, 2009, Train, 2009).
2 Faced with alternative energy sources j = 1, 2, . . . k, a household i chooses energy service jthat maximizes its utility, Uij .
3 We assumed that Uij is an aggregation of deterministic and observed the component—sayVij and an unobserved part ηij , then:
Uij = Vij + ηij (1)
where Vij depends on an observed attributes– κij , and unknown parameter —νj ⇒Vij = νjκij
4 Household head behavioural statement: Given all energy alternatives, a household headchooses energy type j if Uij > Uik,∀ 6= k
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MethodologyHypothesis and Study Objectives
Hypothesis 1
1 Households with comparatively higher income are less likely than those with relative lowlevels of income to use firewood and kerosene.
2 High income households are more likely to depend on gas and electricity perceived as cleanand efficient energy sources
Hypothesis 2
1 The more the household members (large household size), the more the likelihood ofhousehold heads adopting firewood, charcoal and kerosene as their main sources of energyservices.
2 Firewood, charcoal and kerosene are likely to take greater share of large households totalenergy expenditure.
Study Objectives
1 To estimate the covariates of household energy choices for cooking
2 To estimate influential factors of household intensity of dependency on a particular type ofenergy
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MethodologyEconometric Model 1: Determinants of household energy consumption choice
Multivariate Probit Model: Objective 1
yi = 1 if αi x′+ εi > 0 (2)
and yi = 0 if αi x′+ εi ≤ 0, i = 1, 2, . . . n (3)
Where x is a vector of uniquely observed measurable characteristics of a household which mayinclude income level, household head’s gender, education of a household head and otherdemographic features, εi is a vector of the random components (unobserved household head’sintrinsic values, preference etc. for the purpose of this paper) of utility, normalized to zero meanand unitary standard deviation and nXn matrix
Why Multivariate Probit Model
1 Simultaneously analyzes the choice of energy by the source of energy.
2 Relaxes Independence of Irrelevant Alternatives (IIA) assumption
3 Average Ghanaian household engages in Fuel Stacking Behaviour
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MethodologyEconometric Model 2: Intensity of household dependency of different energy sources
Two-Limit-Tobit Model: Objective 2
yi = α0 + αiZi + εi (4)
yi = 1 [y∗i ≥ δ] (5)
yi = 1 [y∗i < δ] (6)
where δ is a constructed threshold that differentiate households that consume a specific energytype from households who otherwise do so.
• The indicator function, 1[·] takes on the value one if the event in the bracket in equation 5 istrue, and takes the value zero if the events specified in the bracket of equation 6 is true.
• yi takes the value one if y∗i ≥ δ, a threshold in which a representative household is classifiedhaving used a type of energy service;
• yi takes the value zero if y∗i < δ, the threshold at which a household is regarded not a userof a particular source of energy captured in the survey datasets
(Wooldridge, 2015, chp. 17 ).
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Econometric Model 2: Intensity of household dependency on differentenergy sources
Two-Limit-Tobit Model: Objective 2
Following equations 4, 5 and 6, we specify probability functions for non-users of particular energysource as
p (y∗i < δ) = Ψ
(αiZi
σ
)(7)
and probability density function for a representative household who used a type of energy sourceas,
f (yi|y∗i ≥ δ) =f (yi)
p(y∗i ≥ δ
) =
1σθ
(y∗−Ziαiiσ
)Ψ
(αiZi
σ
) (8)
and an aggregate function for user-household and non-user-household for a particular energy typeas:
lnL =∑y∗i<δ
ln
1− ΨαiZi
σ+∑yi≥
1
σθ
1
σθ
(y∗−Ziαii
σ
) (9)
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Results for Objective 1 based on GLSS 2016/7: Table 1 ⇒ Household cookingenergy choice
• The marginal effects are presented.
• Firewood is used as the base-category energy choice
Table 1: Marginal effects of Estimated Multivariate Probit Model
(Charcoal) (Gas) (Other fuels)
Regressors
DemographicsFemale head 0.0624** 0.0170 -0.3949***
(0.0244) (0.0307) (0.0375)Head age 0.0077 0.0226** -0.0283***
(0.0080) (0.0110) (0.0098)Head age squared -0.0001 -0.0003*** 0.0002***
(0.0001) (0.0001) (0.0001)Household size =2 -0.0411 -0.3710*** -1.5137***
(0.0841) (0.0999) (0.1076)Household size =3 -0.1249 -0.4829*** -2.0813***
(0.0953) (0.1132) (0.1268)Household size = 4 -0.3588*** -0.7966*** -2.5471***
(0.1081) (0.1305) (0.1467)Household size > 4 -0.5062*** -1.2506*** -2.8021***
(0.1247) (0.1509) (0.1564)Affluence and welfare quintile
ln income (expenditure) 0.3126*** 0.8543*** 0.3914***(0.0653) (0.0835) (0.0781)
2nd Quintile 0.3869*** 0.1535 -0.4397***(0.0819) (0.1631) (0.1083)
3rd Quintile 0.5865*** 0.5128*** -0.5573***(0.0986) (0.1684) (0.1336)
4th Quintile 0.7161*** 0.8476*** -0.4936***(0.1181) (0.1828) (0.1542)
5th Quintile 0.6581*** 1.0044*** -0.5048***
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Table 1 continued from previous page
Charcoal Gas Other fuels
(0.1530) (0.2175) (0.1952)Locations/Ecological Zones
Other urban areas 1.0900*** 1.2652*** -1.2860***(0.2610) (0.2629) (0.2796)
Rural Coastal -1.9623*** -2.1638*** -2.5942***(0.2665) (0.2738) (0.2997)
Rural Forest -2.4147*** -2.8253*** -2.6620***(0.2628) (0.2679) (0.2854)
Rural Savannah -2.7586*** -3.1952*** -1.7962***(0.2657) (0.2792) (0.2870)
Labour market statusRetired/unemployed/other inactive -0.2897*** -0.0719 -0.1824**
(0.0641) (0.0796) (0.0911)Private employee(non-agric) 0.1774** 0.1871** 0.3026***
(0.0700) (0.0795) (0.0933)Public employee -0.1210 0.1607 -0.3307**
(0.1090) (0.1147) (0.1545)Self-employed agric -1.1165*** -1.3741*** -0.7824***
(0.0597) (0.0901) (0.0895)Asset ownership
Renting 0.9299*** 1.0259*** 0.5759***(0.0640) (0.0739) (0.0910)
Rent-free 0.3699*** 0.1276* 0.2758***(0.0499) (0.0654) (0.0710)
Squatting 0.5034* -0.1295 0.3034(0.2617) (0.3416) (0.3228)
Human capitalBECE 0.2245*** 0.8308*** 0.1725*
(0.0677) (0.0824) (0.0933)MSLC 0.2547*** 0.7816*** 0.1190
(0.0632) (0.0805) (0.0985)SSS 0.2895*** 1.3266*** 0.4395***
(0.0853) (0.0946) (0.1034)Voc/Tec/Tea 0.3365*** 1.6614*** 0.2731**
(0.1026) (0.1085) (0.1357)Tertiary 0.2848 2.2504*** 0.8448***
(0.1803) (0.1774) (0.2164)Constant -1.6215*** -7.3132*** 0.0683
(0.5675) (0.7188) (0.6700)
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Table 1 continued from previous page
Charcoal Gas Other fuels
Observations 14,009 14,009 14,009
Standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1
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Results for Objective 2 based on GLSS 2016/7: Table 2 ⇒ Household energydependency
The marginal effects are presented.
Table 2: Estimated Marginal Effects from Two-Limit Tobit Model: Household expenditure share on differentsources of energy
Regressors Gas Kerosene Electricity Solid biomass
DemographicsFemale head 0.0224*** 0.0216 -0.0384*** 0.0458***
(0.0087) (0.0195) (0.0052) (0.0057)Age 0.0053 0.0076 -0.0008 0.0010
(0.0035) (0.0069) (0.0018) (0.0020)Age square -0.0001* -0.0000 -0.0000 0.0000
(0.0000) (0.0001) (0.0000 (0.0000)House size = 2 0.0255 0.0752 -0.0831*** 0.2616***
(0.0275) (0.0711) (0.0173) (0.0196)House size = 3 0.0633** 0.1832** -0.1321*** 0.2450***
(0.0297) (0.0801) (0.0189) (0.0215)House size = 4 0.0184 0.1362 -0.221*** 0.2634***
(0.0343) (0.0936) (0.0212) (0.0240)Household size > 4 -0.0540 0.1997* -0.1381*** 0.3227***
(0.0390) (0.1082) (0.0242) (0.02775)Affluence and Welfare Quintile
log of income(expenditure) 0.2187*** -0.0855 -0.0248* -0.0236(0.0225) (0.0573) (0.0129) (0.0145)
2nd Quintile 0.1902*** 0.0216 0.0552*** 0.0082(0.0663) (0.0698) (0.0183) (0.0189)
3rd Quintile 0.2851*** 0.0166 0.0784*** 0.0116(0.0661) (0.0836) (0.0214) (0.0234)
4th Quintile 0.3838*** 0.0600 0.0861*** 0.0220(0.0682) (0.0996) (0.0246) (0.0272)
5th Quintile 0.4239*** 0.0750 0.0680** -0.0053(0.0752) (0.1309) (0.0316) (0.0349)
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Table 2 continued from previous pageRegressors Gas Kerosene Electricity Solid biomass
Location/Ecological ZonesOther urban areas 0.0564** 0.0992 -0.224 0.0208
(0.0269) (0.0943) (0.0202) (0.0226)Rural Coastal -0.0146 0.6065*** -0.0809*** 0.0732***
(0.0381) (0.1031) (0.0248) (0.0275)Rural Forest -0.1047*** 0.0954 -0.0167 0.0136
(0.0338) (0.1023) (0.0227) (0.0253)Rural Savanna -0.2083*** -0.3128** -0.1171*** 0.1181***
(0.0435) (0.1222) (0.0245) (0.0271)Labour Market Status
Retired/unemployed/other-inactive 0.0172 -0.0720 -0.0297** -0.0033(0.0239) (0.0525) (0.0141) (0.0154)
Private employee(non-agric) 0.0191 0.0514 -0.0226 0.0095(0.0208) (0.0514) (0.0138) (0.0153)
Public employee 0.0793*** -0.3095*** -0.0442** 0.0320(0.0267) (0.1130) (0.0196) (0.0220)
Self-employed (agric) -0.2663*** -0.1180** 0.0398*** -0.0594***(0.0305) (0.0508) (0.0138) (0.0150)
Asset ownershipRenting 0.0350* 0.0101 0.0417*** -0.0103
(0.0201) (0.0517) (0.0125) (0.0139)Rent-free -0.0185 0.1759*** -0.0606*** 0.0672***
(0.0204) (0.0414) (0.0114) (0.0125)Squatting -0.2033* 0.2092 -0.2262*** 0.2828***
(0.1124) (0.2058) (0.0599) (0.0624)Human capital
BECE 0.1838*** -.1811*** 0.0834*** -0.1037***(0.0250) (0.0588) (0.0145) (0.0160)
MSLC 0.1728*** 0.1016** 0.0869*** -0.1083***(0.0246) (0.0512) (0.0140) (0.0153)
SSS 0.3093*** -0.2459*** 0.0979*** -0.1936***(0.0260) (0.0792) (0.0164) (0.0185)
Voc/Tec/Tea 0.3604*** -0.1890** 0.1189*** -0.2607***(0.0270) (0.0830) (0.0183) (0.0208)
Tertiary 0.4417*** -0.2259* 0.0949*** -0.3970***(0.0331) (0.1351) (0.0247) (0.0291)
Constant -3.0733*** -0.9551** 0.8975*** 0.1578(0.1994) (0.4506) (0.1051) (0.1168)
Observations 10,931 10,931 10,931 10,931
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Table 2 continued from previous pageRegressors Gas Kerosene Electricity Solid biomass
Standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1
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Conclusions and Sustainability Policy Implications
General Observations
Ghanaian households energy consumption choices and the intensity of dependency on a particulartype of carrier depend on:
1 Human capital
2 Location/Ecological factors
3 Labour Market Status
4 Socio-demographic characteristics
5 Asset ownership
6 Affluence and Income Class
Sustainability Implications
• Monetary poverty–Energy Poverty Nexus
• Addressing problems of affordability and accessibility gaps simultaneously
• Household energy dependency data paucity
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End Of Presentation
Q & A
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Huq, M. and M. Tribe (2018). The Economy of Ghana: 50 Years of Economic Development.Springer.
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