The relationship between agricultural technology and energy demand in Pakistan

Abstract

The purpose of this study was two fold: (i) to investigate the casual relationship between energy consumption and agricultural technology factors, and (ii) electricity consumption and technological factors in the agricultural sector of Pakistan. The study further evaluates four alternative but equally plausible hypotheses, each with different policy implications. These are: (i) Agricultural technology factors cause energy demand (the conventional view), (ii) energy demand causes technological factors, (iii) There is a bi-directional causality between the two variables and (iv) Both variables are causality independent. By applying techniques of Cointegration and Granger causality tests on energy demand (i.e., total primary energy consumption and electricity consumption) and agricultural technology factors (such as, tractors, fertilizers, cereals production, agriculture irrigated land, high technology exports, livestock; agriculture value added; industry value added and subsides) over a period of 1975–2010. The results infer that tractor and energy demand has bi-directional relationship; while irrigated agricultural land; share of agriculture and industry value added and subsides have supported the conventional view i.e., agricultural technology cause energy consumption in Pakistan. On the other hand, neither fertilizer consumption and high technology exports nor energy demand affect each others. Government should form a policy of incentive-based supports which might be a good policy for increasing the use of energy level in agriculture.