Residential fuel consumption and technology choices: an application of FGNLS and random effects binary logit model

Abstract

In this study, Ethiopian households’ residential fuel usage and technological preferences are analyzed. For 2524 urban families, we use panel data from two waves of the Ethiopian Socioeconomic Survey (ESS). Households’ technology choices and short-run energy consumption behavior are modeled jointly. To estimate the short-run residential fuel consumption behavior, feasible generalized nonlinear least squares (FGNLS) are iterated. Random effects binary logit models are used to predict technology choice. The effective price elasticity of firewood, charcoal, and electricity was found to be negative and less than unity. The effective price of electricity for baking and cooking has a detrimental and considerable impact on technology choice. The choice of traditional baking oven was positively and significantly affected by effective cost of firewood. Traditional cooking stove was also positively and significantly influenced by effective price of charcoal. Technology choice for baking appliance was significantly affected by the dwelling size, and the type of kitchen. Since decisions to choose electric appliances over those that use charcoal and firewood are heavily influenced by housing-related difficulties, energy prices and efficiency of appliances, policy interventions should include house infrastructure installations and efficiency of appliances.