Investigating the effect of industrialization and urbanization on energy consumption using threshold regression

Document Type : Research Paper


1 M.Sc. Student, Department of Energy Economics, Tarbiat Modares University, Tehran, Iran

2 PhD student in Natural Resources and Environmental economics, Department of Agricultural Economic, College of Agriculture, Shiraz University, Shiraz, Iran


Consumption of fossil fuels and greenhouse gas emissions have had various environmental, social, and economic consequences. The rate of urbanization and industrial growth in developing countries has increased dramatically since the beginning of the 21st century, leading to the high consumption of fossil fuels and greenhouse gas emissions. In this study, the factors affecting energy consumption from 1969 to 2017 were investigated using a threshold regression model. The Urban growth rate variable was used as an indicator of migration and the Ratio of value-added by the industrial sector to the total GDP as an indicator of the industrialization of threshold variables. Accordingly, the effects of different factors on energy consumption under the thresholds of these two variables were estimated. The test results confirmed the existence of two thresholds for each of the threshold variables. As for the Urban growth rate variable, threshold values ​​of 0.940 and 1.416 percent were obtained; and for the Industrialization rate variable, these threshold values were equal to 3.687 and 3.808 percent. The results show that the growth rate of urbanization and urban population has negative and positive effects on energy consumption, respectively. The results also revealed that in a situation where the growth of urbanization and industrialization of the middle ranges are slowing down, social and economic phenomena such as migration and the concentration of financial, administrative, and credit systems would intensify the effects of these factors. By increasing energy consumption due to the above two factors, we can expect an increase in GDP as a critical indicator of economic development.


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