Energy Policy 129 (2019) 13–22

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Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Unveiling the heterogeneous effect of energy taxes and income on T

residential energy consumption
Djula Borozan
Faculty of Economics in Osijek, Josip Juraj Strossmayer University of Osijek, Gajev trg 7, HR-31000 Osijek, Croatia

ARTICLE INFO ABSTRACT

Keywords: The paper investigates the effect of energy taxes in the European Union (EU) across different levels of residential
Residential final energy consumption final energy consumption (RFEC) in the period 2005–2016. The analysis is based on quantile panel regression
Energy tax models that directly and indirectly consider energy taxes. More precisely, the developed models provide a
Environmental Kuznets curve multivariate framework for evaluating their effects and, at the same time, for validating the existence of the
Panel quantile regression
energy environmental Kuznets curve (EKC) across the selected quantiles.
The results unveil significant heterogeneity in the RFEC responses across quantiles. Specifically, in less en-
ergy-consuming EU countries, an increase in energy taxes and energy prices influences stronger RFEC, and the
rebound effect of real income and tertiary education is greater than in their more energy-consuming peers.
Moreover, in the former, the energy EKC hypothesis holds, while in the latter, its existence is not clear, as well as
the rebound effect caused by highly educated people. Consequently, EU energy policy aiming at achieving
energy and environmental targets has to consider the heterogeneity in RFEC since the outcomes might be dif-
ferent for different energy-consuming groups of countries.

1. Introduction
Sensitivity of residential final energy consumption (RFEC) on en-
ergy taxes has attracted considerable research interest across the world
(e.g., Berkhout et al., 2004; Oueslati et al., 2016; Feng et al., 2018).
This interest may be partially explained by uncertainty that exists about
the consequences of energy taxes. Energy tax is a policy tax instrument
introduced to reduce negative impacts of energy on the environment,
facilitate its rational use and provide fiscal gains (see Bye and Bruvoll,
2008; Markandya, 2012; Gago et al., 2014). However, it increases the
price of energy, which may have unfavorable consequences for low
income households in particular (OECD, 2006; Oueslati et al., 2016). In
addition, since its rate varies widely from country to country and from
sector to sector, it may reduce the country’s international competi-
tiveness and lead to a decrease in revenues, productivity and employ-
ment in some economic sector (OECD, 2006; Aigner, 2011; Feng et al.,
2018).
The European Union (EU) has been committed to becoming a
competitive, low-carbon and energy efficient economy. To achieve that,
it is important to design effective energy policies. The EU has used
several energy policy instruments and adopted a number of measures to
change the behavior of households and guide them towards meeting its
energy targets. Among them, energy taxes have received significant
attention. They include taxes on energy products such as oil products,
natural gas and electricity. Energy taxes are the most important con-
tributor to total environmental tax revenues, with 76.94% of the EU-28
total in 2016 (Eurostat, 2018a). Moreover, on average, they have ac-
counted for slightly less than 2% of gross domestic product (GDP) and
slightly less than 5% of total tax and social contribution revenues in the
EU-28 in the last several years (Eurostat, 2018b). However, energy
taxes vary considerably across EU countries, reflecting thereby energy
and environmental policy priorities. This is a direct consequence of the
EU complex energy tax policy rules. Namely, they allow a variety of tax
rates, depending on the used type of energy, applied tax reduction and
exemption schemes. Consequently, each EU country has its own en-
vironmental/energy tax system. As a percent of GDP, the largest level of
energy tax revenue was recorded in Slovenia, Latvia and Greece
(3.28%, 3.11% and 3.02%, respectively), while the smallest level was
recorded in Ireland, Belgium and Malta (1.46%, 1.42% and 1.12%,
respectively) in 2016 (Eurostat, 2018a). The lowest energy tax revenues
in relation to a country’s GDP (below 2%) were also reported, in ad-
dition to the aforementioned countries, in Austria, Spain, Germany,
Luxembourg, Slovakia, Lithuania, Sweden, the United Kingdom,
France, the Netherlands, Portugal and the Czech Republic (Eurostat,
2018a).
The total energy tax revenues include taxes on energy use paid by

E-mail address: borozan@efos.hr.

https://doi.org/10.1016/j.enpol.2019.01.069
Received 14 September 2018; Received in revised form 29 January 2019; Accepted 31 January 2019
0301-4215/ © 2019 Elsevier Ltd. All rights reserved.
D. Borozan
six different consumer sectors – households, industry and construction,
wholesale and retail trade, agriculture, forestry and fishing, transpor-
tation and storage, and service sectors. In the period under study, i.e.
2005–2016, about 48% of the revenues collected by governments from
energy taxes came from households (Eurostat, 2018b). Thereby, the
governments in Luxembourg and Slovenia collected from households
the smallest and the highest amount (7.13% and 68.73%), respectively.
Sterner and Koehlin (2003) observed that environmental taxation,
which includes energy taxation, has a more important role in Europe
than in other countries, partially due to greater reliance on and ac-
ceptance of taxes and a larger public sector in general, as well as more
ambitious energy and environmental goals. From the research and
policy perspective, it is very important to find out whether energy taxes
have the expected effect on energy consumption and consequently on
greenhouse gas (GHG) emissions. Energy taxes should be set at the level
which ensures economically efficient, cost- and environmentally effec-
tive effects. Previous studies on the effects of energy taxes on energy
consumption in the EU provide inconclusive results. Some studies re-
ported energy taxes lead to a decrease in energy consumption and GHG
emissions or an increase in energy efficiency (Berkhout et al., 2004;
Filipovic et al., 2015; Lapinskiene et al., 2017), while other studies
(Morley, 2012; Borozan, 2018a) show that RFEC is not directly and
statistically significantly attributable to energy taxes. However, most of
them failed to investigate the energy tax effect within the integrated
framework which takes into account socio-economic and contextual
factors. In addition, to the best of our knowledge, no previous study
addressed the issue of distributional heterogeneity of RFEC and pro-
vided a more comprehensive picture of how the socio-economic and
contextual variables affect RFEC.
The present paper aims to evaluate the direct and indirect effects of
energy taxes for different quantiles of the conditional distribution of
RFEC across EU countries spanning the period 2005–2016. The former
is investigated by including the energy tax variable into the empirical
model, while the latter is investigated through the energy price and
income elasticity of household energy demand. Energy taxes internalize
adverse external costs of energy generation and consumption and in-
crease the price of energy. They change relative prices of final con-
sumption goods and relative returns to production factors such as labor.
Consequently, they also affect income through the transfer of resources
between the private and public sector (Gago et al., 2014; Oueslati et al.,
2016). In addition, the paper tests for the validity of the residential
energy environmental Kuznets curve (EKC) in a multivariate frame-
work. It aims to reveal whether a continuous increase in GDP per capita
in EU countries will tend to decrease RFEC and hence environmental
pressures at different levels and at some point in time.
For that purpose, the paper employs a quantile regression for panel
data (QRPD) method proposed by Powell (2016). This method has
particularly two benefits compared with the conventional panel esti-
mation techniques. It enables one to take into account individual and
distributional heterogeneity simultaneously and hence get a more
complete picture of RFEC determinants. Namely, it estimates the sig-
nificance of explanatory variables throughout the conditional dis-
tribution, including the countries with the most and the least RFEC. By
contrast, ordinary least square (OLS) regression methods consider only
the mean effect and hence fail to consider useful information arising
from the heterogeneous effect (Powell, 2016). In addition, the panel
quantile regression method provides results that are robust to outlying
observations of the explanatory variables and are more effective than
OLS regression (Zhu et al., 2016; Chen and Lei, 2018). The quantile
regression method has already been used in the energy and environ-
mental literature (e.g., Kaza, 2010; Niu et al., 2016), but the literature
on the application of the panel quantile regression method is quite
limited in this field (e.g., Chen and Lei, 2018; Sarkodie and Strezov,
2019), particularly because of its novelty.
Overall, the paper contributes to the literature referring to the fol-
lowing three aspects. First, employing the QRPD for the first time, it
14
Energy Policy 129 (2019) 13–22
examines distributional heterogeneity existing in RFEC. Second, it as-
sesses the effect of energy taxes and tests the validity of the energy EKC
in a multivariate setting across the conditional distribution of RFEC,
which are also a novel contribution. Third, it confirms the hetero-
geneous effect across different quantiles of the conditional RFEC dis-
tribution and the fact that the energy EKC does not hold at each RFEC
level in the EU.
The remainder of the paper is structured as follows. Section 2 briefly
introduces the main research strands on which the paper draws and
reviews the relevant literature. Section 3 describes the data and the
model framework. Section 4 presents and discusses the results, while
Section 5 gives the conclusions, policy implications and directions for
further research.
2. Conceptual background with a literature review
To achieve the aims, the present paper synthesizes knowledge ac-
quired from three research strands. The first research strand is related
to energy taxes. It primarily explains the motivation for their in-
troduction and evaluates their effects. Energy tax is introduced due to
the following: (i) environmental reasons, i.e. to reduce environmental
impacts by decreasing energy consumption; (ii) energy security reasons,
i.e. to enhance energy security by redirecting energy use towards a less-
dependent energy supply structure; iii) social reasons, i.e. to compen-
sate for market failures such as negative externalities generated by
economic activities; and (iv) fiscal reasons, i.e. to increase government
revenues. See Bye and Bruvoll (2008), Markandya (2012) or Gago et al.
(2014) for an overview of the reasons behind energy tax introduction.
Taxation affects volumes and society experiences an efficiency loss
in competitive markets according to neoclassical microeconomic
theory. Namely, it constraints the effects of the market mechanism,
which commonly leads to a Pareto optimal allocation of production
factors, i.e. market efficiency. As Franck Ramsey underlined in 1927
(according to Bye and Bruvoll, 2008), the least elastic goods should be
burdened by such taxation to minimize the efficiency losses. Since en-
ergy goods generally show a low elasticity of demand (Morley, 2012),
they are suitable goods for taxation.
According to the theory of optimal taxation, any tax (except lump-
sum alternatives) influences the behavior of individuals and leads to
distortions of market behavior (Gago et al., 2014). Taxation generates
two effects: an income redistribution effect and a substitution effect.
The former refers to a transfer of money between the private and public
sectors and wealth worsening, particularly of lower income households.
The latter refers to a transition of preferences of households towards
goods that are cheaper, i.e. less affected by taxation.
Jacobs (2012) underlined the government has to choose its tax in-
struments to optimize social welfare while taking into account all re-
levant tax-induced behavioral responses. Thereby, social welfare, which
also includes environmental quality and security of energy supply, will
increase if the government corrects market failure, internalizes ex-
ternalities and provides public goods (Jacobs, 2012). Considering the
social, environmental and energy security reasons, an energy tax in-
troduction is justified and most empirical studies have corroborated
that (for a review, see Bosquet, 2000; see also Morley, 2012).
The double-dividend hypothesis occurred in the 1990s. According to
it, a double benefit, environmental and economic, is achievable by
imposing (or increasing) an environmental tax and decreasing other
taxes, while keeping the same government revenues. Freiere-Gonzales
(2017), who conducted a survey on environmental taxation, underlined
that empirical studies confirmed the environmental effect, which
cannot be clearly said for the size of the fiscal/economy effect.
However, although energy taxes or environmental taxes in general
may generate the double dividend, they may also generate the re-
gressive effect on income distribution (Aigner, 2011; OECD, 2006) and
the adverse effect on international competiveness of some sectors
(OECD, 2006; Oueslati et al., 2016). Many energy products are essential
D. Borozan
goods, and an increase in their prices induced by energy taxes has
unfavorable consequences, particularly on low income households. An
adverse distributional effect and an increase in energy poverty may
appear. Moreover, since energy taxes vary widely across countries and
sectors, they may reduce the country’s and sector’s international com-
petitiveness and hence lead to losses of jobs and revenues. Oueslati
et al. (2016), who analyzed the relationship between energy taxes and
income inequality for 34 OECD countries from 1995 to 2011, found out
that its size and direction depend on the presence of explicit tax revenue
recycling mechanisms.
Since the early 1990s, energy taxes have been considered in the EU
as market-based instruments which should ensure a cost-effective way
for the reduction of energy demand, fostering energy efficiency and
thus the reduction of environmental impacts of energy use. For the
history on energy taxation in European countries, see Speck (2008).
Using cross-sectional regression and panel dynamic regression, Miller
and Vela (2013) explored the effectiveness of environmental taxes for
50 countries from all world regions (including most of EU countries) for
the period 1995–2010. They revealed that countries with higher rev-
enues from environmental taxes exhibit higher reductions in adverse
emissions, energy consumption and production from fossil sources.
Morley (2012) unveiled the negative relationship between environ-
mental taxes and pollution by using a dynamic panel analysis for EU
countries and Norway for the period 1995–2006. But, he failed to reveal
the relationship between environmental taxes and energy consumption
as well as the evidence on the EKC existence.
The second research strand is related to RFEC, which may be un-
derstood as the synergic interplay between a socio-economic and a
contextual domain (Borozan, 2018a). However, the majority of the
previous studies on the relationship between energy taxes and RFEC
failed to examine it within an integrated framework. They mostly fo-
cused on economic determinants. A more integrated approach to its
studying requires an evaluation of the effects of economic, sociological,
institutional and contextual variables, i.e. the integration of knowledge
arising from different theoretical approaches: conventional economics
and behavioral economics as well as social and environmental psy-
chology and sociology. For a review of these approaches, see Karatasou
et al. (2014).
According to conventional economics, individuals behave as ra-
tional and independent actors in a predictable way to policy-induced
measures, financial incentives and generally economic variables such as
prices or income. They try to maximize utility and their own interest.
However, empirical studies demonstrated that they often behave and
respond in unexpected, undesirable and irrational ways (Gillingham
et al., 2009). So, behavioral economics, enriched with psychological
knowledge and empirical evidence, highlights the importance of com-
plexity, multiple choices, risk and uncertainty in explaining, predicting
and guiding consumer behavior including households towards more
sustainable consumption patterns (Sterner and Koehlin, 2003). Social
and environmental psychology emphasizes the role of information and
incentives, and more recently values, attitudes and norms in individual
decision making, including energy consumption (Sterner and Koehlin,
2003; Alberini and Filippini, 2011). Moreover, findings in this field
indicate that individual consumer behavior also varies due to external
conditions (e.g., financial, legal, social or climate) that directly and
indirectly either support or hinder energy-related behavior (Labandeira
et al., 2017). Environmental psychology and sociology consider energy
use as a social phenomenon that can be studied at the household level.
Thereby, particular macro-level societal factors such as education level
or poverty also determine household energy use.
Empirical studies covering the EU (e.g., Borozan, 2018a, 2018b)
confirm that human capital, labor market, poverty and economic
variables are important drivers of energy consumption among socio-
economic determinants, while the context, presented through the level
of economic development, the state of the economy and climate in
particular, also play an important role within which decisions on energy
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Energy Policy 129 (2019) 13–22
consumption are made.
The third research strand, on which the present paper draws, is
related to the relationship between environmental quality and income
level. Empirical research thereon began with Grossman and Krueger
(1995), who discovered that the relationship has an inverted U-shape.
This hypothesis was called the EKC after Simon Kuznets. He stated in
the 1950s that income distribution and income level can be described
by an inverted U-curve.
Over the last two decades, many empirical studies have been con-
ducted to test for the existence of the EKC at the cross-national level
(Mazur et al, 2015; Lapinskiene et al., 2017; Auci and Trovato, 2018).
Thereby, some of them used the amount of pollutants or the level of
GHG emissions as indices of environmental pressures (Mazur et al,
2015; Lapinskiene et al., 2017; Auci and Trovato, 2018), while others
used energy consumption for the same purpose (Suri and Chapman,
1988; Luzzati and Orsini, 2009; Morley, 2012; Pablo-Romero and
Sanchez-Brada, 2017; Borozan, 2018b).
Several empirical studies with environmental quality as the de-
pendent variable were focused on European countries and provided
evidence of the EKC existence (e.g., Auci and Trovato, 2018 for 25 EU
countries for the period 1997–2005; Lapinskiene et al., 2017 for 20 EU
countries for the period 2006–2013). By contrast, some of them failed
to do that (e.g., Mazur et al., 2015, who did not confirm the EKC ex-
istence for all 28 EU countries, but only for 16 older EU countries for
the period 1992–2010). With respect to energy consumption as the
dependent variable, Morley (2012) did not find any evidence of the
existence of the energy EKC in the EU for the period 1995–2006.
However, Pablo-Romero and Sanchez-Brada (2017) corroborated its
existence for the residential sector for the period 1990–2013 by using a
multilevel mixed-effects model for parameter estimation. Borozan
(2018b) confirmed the existence of the residential electricity EKC in
multivariate settings in the period 2005–2016.
To summarize, the majority of empirically oriented studies have
already studied the effects of energy taxes, energy prices, GDP on RFEC
including the existence of the EKC for the EU. But, they did that within
a narrow conceptual framework which primarily addressed economic
variables. No study has considered the possibility that the effects of
regressors can be different across the conditional distribution of RFEC
and in a more integrated framework.
3. Data and methodology
3.1. Data and the empirical model
In this paper, the dependent variable is final energy consumption in
households per capita (energy), as shown in equation (1). It includes
total energy consumed by households as final users. It is calculated by
transforming RFEC expressed in 1000 tonnes of oil equivalent (toe) into
kilowatt hour (kWh), and then dividing by average population. Table 1
(the first column) presents summary information on the data. The ex-
planatory variables cover the socio-economic and contextual domains:
energy = f(prices, tax , gdp , poverty, educ , recession, climate ). (1)
Energy taxes (tax) refer to total energy tax revenues collected for a
calendar year. They entered the model as a percentage of GDP. Energy
prices (prices) are calculated as a weighted average of prices for elec-
tricity and natural gas for a medium-sized household. The shares of
electricity and gas in total final energy consumption in households were
taken as the weights. Tertiary education (educ) captures the percent of
population from 15 to 64 with tertiary education provided by uni-
versities and other higher education institutions. The risk of poverty
(poverty) or social exclusion refers to the percentage of population who
are either at risk of poverty or severely materially deprived or living in
households with very low work intensity.
Climate conditions (climate) and recession (recession) are the time-
varying dummy variables. The former were determined according to
D. Borozan Energy Policy 129 (2019) 13–22

Table 1
Descriptive statistics.
Variable Symbol Obs. Mean Std. Dev. Min Max Skewness Kurtosis VIF

Final energy consumption in households per capita (kWh per capita) energy 336 6791.42 2295.28 1815.79 13116.18 − 1.00 3.88 4.01
Real GDP per capita (const EUR) gdp 336 26523.32 17340.8 4379.77 91500.00 − 0.11 2.35 5.78
Energy prices for medium-sized households (const EUR_cents per kWh) prices 336 8.758 5.93 1.19 36.11 − 0.09 2.88 3.58
Tertiary education (% of population from 15 to 64 with tertiary education) educ 336 23.56 7.41 9.10 39.60 − 0.032 1.92 1.55
Recession dummy (1 if the years are 2008–2012; 0 otherwise) recession 336 0.42 0.49 0.00 1.00 0.34 1.11 1.04
Climate conditions (1 if a country has more than 4200 HDD; 0 otherwise) climate 336 0.10 0.29 0.00 1.00 2.76 8.61 1.32
Energy taxes (% of GDP) tax 336 1.94 0.46 1.12 3.32 0.72 3.31 1.20
People at risk of poverty or social exclusion (%) poverty 336 24.98 8.58 13.30 61.30 1.48 5.63 2.35

Note: The missing values for the risk of poverty rate for Croatia (2005–2010) and Romania (2005–2006) were interpolated using STATA. Energy prices for Cyprus,
Finland, Malta (2005–2016) and Greece (2005–2012) refer to the weighted prices for electricity. The log form of the energy, gdp and price variables are used to
calculate VIF, skewness and kurtosis.

Lechtenboehmer and Schuering (2009), who outlined that a cold cli-
mate zone has more than 4200 heating degree days (HDD). The latter
was included into models to capture the Great Recession effect.
The monetary variables (GDP per capita and energy prices) were
deflated by using the harmonized indices of consumer prices
(2015 = 100) to remove the effect of inflation therefrom. All data were
provided by Eurostat. The logarithmic values of the following variables
are used in further econometric analysis: energy, gdp and prices. The
study uses balanced panel data which observe the behavior of EU
countries across time. Each country has its own specificities (individual
effects) and there is heterogeneity across countries; hence, the panel
econometric technique is well suited to the paper aims as stated by
Borozan (2018b).
The observed period is 2005–2016 primarily due to data avail-
ability. The data on the poverty variable has been available for most of
the EU countries since 2005.
3.2. Method
The present paper uses a nonadditive fixed effect panel quantile
regression model to estimate the direct and indirect effects of energy
taxes and other explanatory variables on RFEC throughout the condi-
tional distribution. The quantile regression method was proposed by
Koenker and Bassett (1978). It is a generalization of mean regression
analysis to other quantiles. Hence, it is a very useful method for in-
vestigating asymmetric features of the variables of interest. The con-
ditional quantile of the dependent variable yi given a vector of re-
gressors, xi, can be presented in the following way:
Qyi ( x i) = x iT , (2)
where the subscript i denotes an individual (i = 1, …, N), i.e. a country
in this paper, β is the vector of parameters to be estimated and τ refers
to the τ–th quantile, τ ϵ (0, 1). However, this method does not consider
the unobserved individual heterogeneity. Hence, panel quantile re-
gression was used in this paper. Based on the results of the Hausman
test, a fixed effect model for regression is employed. Thereby, a con-
ditional panel quantile regression model is given as follows:
Qyit ( k i, x ii ) = i + xitT ( k ), i = 1, …, N ; t = 1, …, T , (3)
where N and T are the numbers of observations on the individual i and
the time t, respectively. αi stands for the unobserved individual het-
erogeneity. The effects of the explanatory variables xit are permitted to
depend upon the quantile τ of interest. To estimate the coefficients of
explanatory variables, we applied the estimation method proposed by
Powell (2016), QRPD with nonadditive fixed effects. This is a special
case of the generalized quantile estimator. As stated by Powell (2016),
this estimator solves an interpretation problem posed by an alternative
fixed-effect quantile estimator, allowing an arbitrary correlation be-
tween the fixed effects and the instruments. Detailed information on the
method is given in Powell (2016). Numerical optimization in this paper
is obtained by using the adaptive Markov Chain Monte Carlo procedure.
Because of the potential endogeneity problem in equation (3), the
empirical model is developed in a robust instrumental variable frame-
work (see Uyar and Uyar, 2018). To conduct a panel quantile regression
analysis, the user-written qregpd command by Baker et al. (2016) in
Stata 13.0 was used in this paper.
4. Results with discussion
4.1. Preliminary analysis
Table 1 shows the descriptive statistics of the variables used in
empirical analysis. Considerable heterogeneity across EU countries can
be observed in the data. All variables are more or less skewed, which
additionally supports the usage of the quantile regression approach to
estimate the effect of independent variables on the quantiles of RFEC.
Specifically, RFEC per capita varies significantly across countries,
whereby more developed EU countries with colder climate use more
energy than less developed countries or countries with milder climate.
In addition, energy prices as well as the share of highly educated people
in total population are smaller in less developed EU countries. By
contrast, the percentage of people at risk of poverty is higher in this
group of EU countries.
Considering the dependent variable, the lower quantiles (i.e. below
the 20th percentile), refer to countries with lower RFEC per capita such
as Malta, Portugal, Spain, Romania or Bulgaria. The quantiles between
the 20th and the 50th percentiles refer to countries such as Cyprus,
Greece, Croatia, Slovenia, Italy or Poland. The quantiles between the
50th and the 70th percentiles refer to countries such as the UK, the
Netherlands, France, the Czech Republic, while higher quantiles, i.e.
above the 70th percentile, refer to countries such as Finland,
Luxembourg, Denmark, Belgium, Sweden or Austria.
Before conducting panel data analysis, a test for stationarity in a
panel dataset should be conducted. In this paper, stationarity is tested
by the Levin-Lin-Chu test and the Pesaran CIPS test. Table A1 in the
appendix presents their results. According to the former, all variables
are stationary at the 1% or 5% significance level during the sample
period, while according to the latter, there is a doubt about the real
energy price and poverty variables. After we applied the additional test,
i.e. the Fisher-type Phillips-Peron unit root test, we decided to continue
with the variables at level. Powell (2016) observed that differencing,
which is valid in mean regressions, does not necessarily account for
fixed effects in a quantile framework.
As presented in Table A2 in the appendix, there is no strong cor-
relation between dependent variable and explanatory variables. This
reduces the possibility that regression results would be inconsistent and
biased. Correlation coefficients together with variance inflation factors
(VIF) (Table 1, the last column) suggest that multicollinearity is not
present in regression analysis.

16
D. Borozan Energy Policy 129 (2019) 13–22

Table 2
Panel quantile regression results.
Independetn variable Estimated coefficients for different quantiles (dependent variable: ln(energy)

10th 20th 30th 40th 50th 60th 70th 80th 90th

Model 1
ln(prices) 0.026*** − 0.390* − 0.440* − 0.414* − 0.478* − 0.320* − 0.367* − 0.353*
tax − 0.301 0.113* 0.086* 0.138* 0.090* 0.036 0.025 0.125***
ln(gdp) − 0.361 0.484* 0.570* 0.606* 0.628* 0.375* 0.484* 0.592*
Model 2
ln(prices) − 0.562* − 0.565* − 0.466* − 0.385* − 0.403* − 0.228* − 0.372* − 0.123* − 0.319*
tax 0.148* 0.124* 0.116* 0.095* 0.107* 0.063 0.140* 0.132* 0.073**
ln(gdp) 1.437* 2.266* 2.394* 1.292* 1.239* − 1.180*** 3.498* 0.195 0.648
ln(gdp2) − 0.044* − 0.085* − 0.092* − 0.039* − 0.033* 0.076** − 0.153* 0.001 − 0.007
Model 3
ln(prices) − 0.524* − 0.512* − 0.385* − 0.392* − 0.355* − 0.323* − 0.338* − 0.344* − 0.365*
tax 0.135* 0.129* 0.082* 0.061* 0.108* 0.074* 0.062* 0.001 − 0.019*
ln(gdp) 0.421* 0.488* 0.508* 0.514* 0.504* 0.401* 0.333* 0.325* 0.380*
poverty − 0.009* − 0.004* − 0.002* − 0.002** − 0.008* − 0.010* − 0.010* − 0.010* − 0.006**
educ 0.006* 0.006* 0.003* 0.003* 0.000 0.001* − 0.001 − 0.001 − 0.003*
recession − 0.077 0.105* 0.060* 0.033 0.119* − 0.001 0.019 0.046* − 0.039
climate 0.228* 0.124* 0.292* 0.200* 0.175* 0.196* 0.378* 0.398* 0.403*
Wald test (p = 0.000) 24555.70 45589.22 52093.48 71321.16 99502.10 1.1e + 05 15982.72 1.0e + 05 36905.08
Model 4
ln(prices) − 0.509* − 0.549* − 0.451* − 0.400* − 0.336* − 0.332* − 0.303* − 0.320* − 0.393*
tax 0.120* 0.116* 0.111* 0.064* 0.057* 0.084* − 0.020 0.005 − 0.005
ln(gdp) 1.003* 1.922* 0.868* 0.295* 0.417* 0.824* − 1.090*** 0.330 1.208***
ln(gdp2) − 0.026** − 0.067* − 0.018** 0.010* 0.002 − 0.021* 0.071** − 0.002 − 0.043
poverty − 0.003* 0.001 − 0.004* − 0.006* − 0.006* − 0.009* − 0.002 − 0.011* − 0.008*
educ 0.007* 0.000 0.004* 0.002** 0.001* 0.000** 0.001 − 0.001*** 0.000
recession 0.059* 0.119* 0.093* 0.051* 0.070* 0.076* 0.179* 0.052* 0.018
climate 0.180* 0.180* 0.293* 0.261* 0.249* 0.234* 0.081 0.378* 0.373*
Wald test (p = 0.000) 2.7e + 05 65258.84 86521.40 62952.44 1.6e + 05 1.5e + 05 96684.54 18898.52 24283.46

Note: .
Parameter estimations were run in a robust instrumental variable framework in all models. The results are insignificant for Model 1, the 10th quantile.
* indicate significance at the 1% levels, respectively.
** indicate significance at the 5% levels, respectively.
*** indicate significance at the 10% levels, respectively.

4.2. Results
For comparison purposes, empirical model (1) is first estimated by
the panel model with fixed effects and robust standard error (Model 1A
and Model 3A). Their results are presented in Table A3 in the Appendix.
In short, real energy prices, poverty and tertiary education statistically
negatively affect RFEC, while both dummy variables affect it positively.
The results corroborated the presence of individual heterogeneity and
Hausman tests corroborated the application of panel regression models
with fixed effects. However, the effects of regressors may follow a
nonlinear pattern indicated by descriptive statistics, which may escape
linear modeling. Thus, to consider distributional heterogeneity, panel
quantile regression models with nonadditive fixed effects were run. The
results of four different models are presented in Table 2 for the
10th–90th percentiles of the RFEC conditional distribution. Models 1
and 2 show the results only for main variables of interest, while Models
3 and 4 show the results for the full model specification presented by
equation (1).
Bearing in mind the aims of the paper, we consider the estimated
coefficients from Model 4 to be the most reliable, particularly in the
case of statistically significant quadratic form of the gdp variable. Table
A3 in the appendix also presents the results of the pooled panel quantile
regression models (Models 2A and 4A). A comparison of the OLS and
quantile regression methods results supports the hypothesis on the ex-
istence of distributional heterogeneity across countries. Moreover, it
shows that the relationship between RFEC and selected regressors is
more complex than assumed in the literature so far.
Different specifications of the panel quantile regression models with
nonadditive fixed effects, that were run to check for the robustness of
the results, corroborate generally the results obtained. The values of the
joint Wald test statistics confirm the overall effect of both socio-
economic and contextual variables plays a statistically significant role
across the whole distribution of RFEC.
4.3. Discussion
The estimated coefficients of the share of energy tax in a GDP
variable (tax) are significantly positive at lower quantiles, while they
become insignificant at higher quantiles and negative at the 70th and
90th percentiles. This implies that higher energy taxes increase energy
consumption in lower energy-consuming EU countries, which can be a
consequence of government efforts to achieve fiscal gains and at the
same time mitigate the negative effects on low income households by
using a broad set of subventions, exemptions or reduction schemes. By
contrast, in higher energy-consuming EU countries, i.e. at higher
quantiles (the 70th and 90th percentiles), energy taxes lead to a de-
crease in energy consumption; nevertheless, their effect is not statisti-
cally significant.
Poor efficiency of energy or environmental taxes in European
countries has already been implicitly detected in the literature (e.g.,
Ekins and Speck, 1999 for Western European countries in the 1990s,
Morley, 2012 for EU countries and Norway for the period 1995–2006 or
Borozan, 2018b for the EU over the period 2005–2018). Lapinskiene
et al. (2017) provided evidence that higher energy taxes together with
research and development and a number of sustainable enterprises
decreased the level of GHG in 20 EU countries in the period 2006–2013.
Similarly, Kosonen and Nicodeme (2009) concluded that fiscal instru-
ments such as taxation may be important for achieving the EU energy
targets alone or in combination with other market-based instruments
and regulatory measures.
This paper shows that energy tax is not efficient alone; changes in
energy policy measures are necessary therefor. Distributional

17
D. Borozan
heterogeneity should not be ignored and energy policy should not apply
the same policy mix to different levels of RFEC.
In line with traditional economic theory, real energy prices affect
RFEC negatively at all quantiles of its conditional distribution.
Compared with the fixed effects panel model (Table A3 in the ap-
pendix), which estimates the real energy price elasticity of −0.18,
panel quantile regression models (3 and 4 in Table 2) yield a higher
absolute mean estimate of about −0.36. The effect is evidently stron-
gest in EU countries with lower level of energy consumption, while it
becomes weaker in more developed EU countries, i.e. countries whose
households consume more energy.
Surveying the literature, Labandeira et al. (2017) found out that the
price elasticity of energy products in the short-run ranges between
−0.09 and −0.76. The same authors also performed a meta-analysis
for energy demand from around the world for the period 1990–2014
and unveiled that, on average, the short-run price elasticity amounted
to −0.2. Consistently with the results of the present paper, they ob-
served that price elasticities of energy demand are significantly higher
in developing countries compared with their more developed peers.
Moreover, they concluded that price elasticities of energy demand are
quite similar among different energy products. Espey and Espey (2004)
carried out a meta-analysis for residential electricity demand from
around the world over the period 1947–1997 and reported that the
short-run price elasticity amounted to −0.35. Azevedo et al. (2011)
found out that the short-term price elasticity for residential electricity
demand was −0.2 for the EU in the period 1990–2004, while Borozan
(2018b) provided evidence of very low price elasticity of residential
electricity consumption in the EU (around −0.1) in the period
2005–2016.
Low estimated values of energy price elasticity for different per-
centiles of the conditional distribution of RFEC suggest that energy
policy cannot be effective from the environmental and social point of
view in the short-run. An increase in energy prices caused by policy-
induced measures such as an increase in the energy tax rate or exo-
genous factors will not provoke a considerable decrease in energy
consumption. Namely, it seems that households will not have much
incentive to invest in energy efficient or energy conservation innova-
tions to decrease energy consumption, as Borozan (2018b) already
pointed out.
As for real GDP per capita, its estimated coefficients are significantly
positive at all quantiles. This may be a result of the rebound effect,
which assumes that improvements in energy efficiency caused by
technological innovations and higher GDP lead to an increase in de-
mand for energy. The rebound effect is stronger at lower quantiles,
probably because of greater unsatisfied demand for energy, which
could stem from a greater elasticity of energy demand to energy price
changes. It is observed from Models 2 and 4 that an increase in real GDP
per capita leads to greater energy consumption rather than to energy
reduction, which also suggests the presence of the rebound effect.
Furthermore, negative coefficients of the ln(gdp2) variable in Model 4
are significant at lower quantiles supporting thereby the inverted U-
shaped energy EKC hypothesis. In countries with lower RFEC, it in-
creases up to a certain level as real GDP goes up; after that, it decreases.
By contrast, at higher quantiles, the validity of this hypothesis is not
clear. This finding is not completely consistent with Mazur et al. (2015),
who corroborated the existence of the EKC only for 16 older EU
countries for the period 1992–2010, but not for the newer EU countries,
or with Pablo-Romero and Sanchez-Brada (2017) and Borozan (2018b),
who supported its validity in the EU by empirical data. However, all of
them assessed the mean effect, and the existence of distributional het-
erogeneity may be one reason for mixed results. EU countries with
different levels of RFEC per capita evidently follow a different growth
path which has to be respected by policy authorities. However, at the
18
Energy Policy 129 (2019) 13–22
same time, they should not support growth that goes to the environ-
mental determinant, expecting that after some point of time, environ-
mental damage will be compensated.
Technological innovations are extremely important for energy effi-
ciency improvements and growth and highly educated and trained
labor force is of crucial importance therefor. In fixed effects panel
model results (Models 1A and 3A), tertiary education statistically sig-
nificantly and negatively affects the dependent variable which supports
the hypothesis that more educated people behave in a more en-
vironmentally friendly way and consume less energy. Though, in panel
quantile Models 3 and 4, the effect is not as straightforward. At almost
all quantiles, except the highest one, the results show that people with
tertiary education rebound; although they probably have higher dis-
posable income and better financial capacities to realize energy re-
duction and the energy efficiency improvement potential than less
educated people or poorer people, they demand more energy services
(Borozan, 2018a). Moreover, tertiary education turned out to have a
very weak influence on RFEC in all models. Borozan (2018b) concluded
that the favorable effect of tertiary education on electricity consump-
tion must be strengthened by policy measures such as, for example,
fostering intensive awareness-raising programs on electricity appliance
labels or green energy and energy efficiency educational workshops and
programs in schools. The other studies covering the EU have also
confirmed a significant effect of education level on pro-environmental
behavior and/or energy use (e.g., Meyer, 2015).
Recently, energy poverty has started to attract more attention in the
EU energy literature. Auci and Trovato (2018) and Mazur et al. (2015)
provided evidence that some areas within Europe, particularly in
Central Eastern and South Europe, are also deprived of access to a se-
cure supply of clean and affordable energy, and that their choice of fuel
is more limited. This paper shows that the effect of the poverty variable
on RFEC is significantly negative at all quantiles except in Model 4,
particularly the 20th and 70th percentiles, where it turns out to be
insignificant. Still, the magnitude of this effect is small regardless of the
quantiles considered. The recession made the economic situation even
worse, particularly for low income and other vulnerable households. It
did not leave a lot of room for considerable financial investments in
energy efficiency improvements and innovations. However, it turns out
that this variable positively influences RFEC across most of the quan-
tiles. This could be a result of the government assistance programs and
measures designed and implemented at different levels (local, regional,
national, EU) to mitigate the consequence of the hard economic situa-
tion. For a review of energy poverty polices and measures in the EU, see
Bouzarovski (2018). Further research should check this relationship
and explore more deeply the reasons therefor.
Finally, it can be observed that the estimated coefficients of the
climate variable are statistically significantly positive throughout the
conditional distribution (except in the 70th percentile in Model 4),
implying that households in countries with colder climate (e.g.,
Finland, Luxembourg, Denmark, Sweden or Austria) use more energy
than households in countries with milder climate. The effect of colder
climate on energy consumption is already observed in the literature
(e.g., Kavousian et al., 2013; Borozan, 2018a, 2018b), and hence it is
not unexpected.
In a nutshell, the quantile panel regression models indicate that
energy tax generates more fiscal than environmental gains across al-
most all levels of RFEC. In this form, it seems it is not an effective policy
tool for decreasing RFEC directly and hence achieving the double di-
vidend. However, its efficiency can be increased if the governments use
collected energy tax revenues for example, to invest or support research
and development of new, energy-efficient technologies and practices. A
negative sign of the estimated coefficient for the energy tax variable for
the highest quantile of RFEC speaks in favor of this hypothesis. Namely,
D. Borozan
this quantile includes countries such as Finland, Sweden, Denmark or
Belgium that are well known as countries whose governments devel-
oped and implemented a range of environmental revenue recycling
policies and measures (see Anderson, 2010; Oueslati et al., 2016).
Further research should examine the impacts of alternative tax revenue
recycling options.
As a policy-induced instrument, energy tax increases prices of en-
ergy services, making them more expensive. Many governments are
hoping that this will encourage households to use energy in a more
rational way. However, in the short-run, an increase in energy prices
will not motivate enough households to conduct energy-efficient or
energy-saving innovations regardless of the quantiles considered.
Energy is irreplaceable in the life of households and RFEC is energy-
price inelastic in the short-run. To change energy consumption behavior
towards more sustainable energy practices, energy and environmental
policy should combine energy taxes with other measures such as
stronger energy efficiency standards like building codes or energy ap-
pliance standards, particularly in more developed EU countries, as
shown in this paper. At the same time, they should take care of low
income households since these measures are an additional economic
burden to them. Poverty, including energy poverty, is omnipresent to a
greater or lesser extent. However, informational, educational and
awareness-raising programs on energy efficiency and energy savings in
households are always needed, particularly in low income households,
since they empower households with human capital without jeo-
pardizing their quality of life. For a review of policy targets, measures
and progress regarding household energy use, see Eichhammer and
Lapillone (2015), European Commission (EC, 2016) and European En-
vironment Agency (EEA, 2018).
5. Conclusions and policy implications
In this paper, the relationship between energy taxes, including other
important socio-economic and contextual variables, and the conditional
distribution of the RFEC variable was investigated for EU countries in
the period 2005–2016. Most previous studies that examined this re-
lationship failed to do that in a multivariate setting and particularly
consider distributional heterogeneity of RFEC. However, the results are
likely biased if the model considers only institutional or economic
variables. Moreover, the effects of these variables on the mean of the
RFEC distribution are incomplete in the presence of distributional
heterogeneity. Since the effects of energy taxes and other important
variables vary across countries over time and along the conditional
RFEC distribution, the usage of the quantile panel regression model to
examine the relationship of interest is justified in this paper. By looking
at different points of the distribution of the RFEC variable, a more
comprehensive picture of the effects of socio-economic and contextual
variables thereon is achieved.
The results show that the share of energy tax in the GDP variable
significantly increases energy consumption in lower energy-consuming
EU countries, while at higher quantiles, it leads to a decrease in energy
consumption, but not significantly. However, it increases the price of
energy and influences RFEC. This effect is stronger in EU countries with
a lower level of RFEC and it is weaker in richer EU countries, i.e.
countries whose households consume more energy. A decrease in RFEC
and consequently an environmental effect that may occur with an in-
crease in energy prices will not be of great magnitude since RFEC is
energy-price inelastic in the short-run. By contrast, an increase in RFEC
will be stronger with an increase in real GDP per capita at all quantiles.
A positive effect of real GDP per capita may be a result of the rebound
effect that becomes weaker at higher quantiles. Moreover, the inverted
U-shaped energy EKC is validated, particularly for the lower quantiles,
19
Energy Policy 129 (2019) 13–22
while for the higher quantiles the results are not clear. The results also
show that people with tertiary education rebound at almost all quan-
tiles, except the highest one. However, it turned out that their effect on
RFEC is weak as well the effect of the risk of the poverty variable.
Poverty and hard economic times require special energy policy pro-
grams and measures. Climate conditions affect RFEC and this paper
demonstrated that their effect is predominantly statistically sig-
nificantly positive throughout the conditional distribution, implying
that households in countries with colder climate use more energy than
those in countries with milder climate.
It is plausible to assume that final energy consumption in each
country is heterogeneously distributed as income and welfare are in
general. Hence, the effect of energy taxes on RFEC might be different at
different household income and consuming levels. This paper in-
vestigated the effect of distributional heterogeneity of RFEC across EU
countries in a multivariate framework, but further research should test
the validity of this hypothesis in other economic sectors, regions or
countries with different ambitions considering energy and environ-
mental goals.
Confirming the existence of heterogeneity in the conditional dis-
tribution of RFEC, the results imply several policy implications. First, to
achieve the energy targets, the EU energy policy authorities have to
design different programs for different energy-consuming groups of
countries. Further research should provide a useful classification of
these countries that takes into account socio-economic and contextual
variables. Second, considering the existence of the energy EKC in less
energy-consuming countries, governments should empower economic
growth and development and ensure their energy greening across dif-
ferent stages of their development path. Several measures that can be
tailored to that end are mentioned in continuation as additional policy
implications. Third, to be more efficient and effective from the eco-
nomic and ecological point of view, energy taxes, which gain seemingly
more fiscal benefits than environmental ones due to inelastic energy
prices in the short-run, particularly in less energy-consuming countries,
should be recycled in a more environmental way. Its efficiency can be
increased if governments use these revenues, for example, to invest or
support research and development of new energy-efficient technologies
and practices. Further research should discover the effects of different
recycling options. To change energy usage behavior towards more
sustainable energy practices, energy and environmental policy should
combine energy taxes with other measures such as stronger energy ef-
ficiency standards, particularly in more developed EU countries.
Fourth, although the paper shows that people with tertiary education
rebound more at lower levels of energy consumption and that the effect
is generally weak across quantiles and even negative and insignificant
at the highest quintile, empowering human capital is not an option with
alternatives. Human capital is of crucial importance not only for new
technological developments and innovations, but also for its usage in
practice. Hence, informational, educational and awareness-raising
programs on energy efficiency and energy savings in households are at
least equally required as an increase in investments in advanced energy-
efficient technologies and innovation to decrease RFEC without threa-
tening the quality of life. Finally, knowledge on new energy technolo-
gies and sustainable practices should be shared across countries and
energy policy authorities should create a supportive and encouraging
environment for its transfer and knowledge sharing as well as an in-
crease in absorptive capacity in their countries. Further research should
address this topic.
Declarations of interest
None.
D. Borozan Energy Policy 129 (2019) 13–22

Appendix

See Appendix Table A1–A3.

Table A1
Stationarity test results.
Levin-Lin-Chu (LLC) test Pesaran (2007) CIPS test

Constant only Constant + trend Constant only Constant + trend

Adjusted t*stat p-value Adjusted t*stat p-value Zt-bar stat p-value Zt-bar stat p-value

ln(energy) − 8.2028 0.000 − 10.0686 0.000 − 0.003 0.499 − 1.475 0.070

ln(prices) 1st difference − 2.9954 0.0014 − 6.1078 0.000 − 1.758 0.039 − 0.302 0.381
− 0.362 0.359 1.414 0.921
Fisher-PP: Fisher-PP: Fisher-PP: Fisher-PP:
− 0.3543 0.3616 − 0.3962 0.3460
tax − 1.9274 0.0270 − 10.6402 0.000 − 0.982 0.163 1.204 0.886
poverty 1st difference − 6.2667 0.000 − 8.9342 − 1.916 0.028 − 2.241 0.013
− 0.563 0.287 − 0.665 0.253
Fisher-PP: Fisher-PP: Fisher-PP:
− 5.0048 0.0000 − 1.3277 0.0921
educ − 5.6141 0.000 − 11.2721 0.000 − 0.722 0.235 1.285 0.901
ln(Y) − 13.3522 0.000 − 12.8018 0.000 2.334 0.990 1.717 0.957

Note: H0 for CIPS tests: series is I(1), while H0 for LLC test: panels contain unit roots. The stationarity is also tested by the Fisher-type Phillips-Peron unit root test. Its
statistics refers to inverse normal, and H0 is: all panels contain unit roots. To mitigate the effect of cross-sectional correlation which may appear because EU countries
share some similarities, the version of the test with the removed cross-sectional means was employed.

Table A2
Pearson correlation coefficients.
Variable energy prices tax gdp poverty educ recession climate

energy 1.000
prices − 0.2147* 1.000
tax 0.1159* − 0.2847* 1.000
gdp 0.5340* 0.5520* − 0.2511* 1.000
poverty − 0.4304* − 0.4617* 0.1817* − 0.7296* 1.000
educ 0.3912* 0.2215* − 0.099 0.5229* − 0.2888* 1.000
recession 0.0493 0.0291 − 0.0611 − 0.0125 − 0.0353 − 0.07 1.000
climate 0.3265* 0.095 0.0623 0.1617* − 0.1907* 0.2924* 0.0548 1.000

* indicates significance at the 5% level.

Table A3
Panel quantile regression results.
Model 1A (fixed effects panel model) Model 2A (pooled panel quantile model)

Estimated coeff. Robust std.err. Estimated coefficients for different quantiles

Independent variables 10th 20th 30th 40th 50th 60th 70th 80th 90th

* * * * * * * * *
ln(prices) − 0.174 0.035 − 0.513 − 0.507 − 0.434 − 0.393 − 0.362 − 0.341 − 0.339 − 0.350 − 0.362*
tax 0.023 0.029 0.173* 0.134* 0.113* 0.100* 0.102* 0.086* 0.071* 0.004 − 0.029***
ln(gdp) 0.102 0.068 0.487* 0.491* 0.521* 0.487* 0.455* 0.395* 0.358* 0.310* 0.335*
poverty − 0.003*** 0.001 − 0.004*** − 0.004 − 0.004** − 0.006* − 0.008* − 0.010* − 0.011* − 0.011* − 0.010*
educ − 0.006** 0.002 0.008* 0.006*** 0.002 0.001 0.000 0.000 − 0.001 0.000 − 0.001
recession 0.040* 0.006 0.056*** 0.068*** 0.080* 0.068* 0.060* 0.045** 0.023 0.047** 0.054*
climate 0.038* 0.010 0.151* 0.143 0.247* 0.190* 0.208* 0.236* 0.389* 0.384* 0.378*
const 8.242* 0.715 4.194* 4.359* 4.155* 4.544* 4.921* 5.604* 6.098* 6.778* 6.645*
Pseudo R2 0.4079a 0.6072 0.5589 0.5418 0.5212 0.4947 0.4644 0.4417 0.4342 0.4488
Hausman test 71.53; p = 0.000
(continued on next page)

20
D. Borozan Energy Policy 129 (2019) 13–22

Table A3 (continued)

Model 1A (fixed effects panel model) Model 2A (pooled panel quantile model)

Estimated coeff. Robust std.err. Estimated coefficients for different quantiles

Independent variables 10th 20th 30th 40th 50th 60th 70th 80th 90th

Model 3A (fixed effects panel model) Model 4A (pooled panel quantile model)
ln(prices) − 0.175* 0.035 − 0.523* − 0.538* − 0.446* − 0.392* − 0.357* − 0.338* − 0.352* − 0.364* − 0.368*
Tax 0.022 0.029 0.166* 0.131* 0.110* 0.101* 0.095* 0.088* 0.076* 0.010 − 0.015
ln(gdp) 0.496 0.880 0.981 1.734*** 0.819 0.372 0.903 0.589 1.512*** 1.101* 1.775*
ln(gdp2) − 0.020 0.044 − 0.024 − 0.059 − 0.015 0.006 − 0.023 − 0.010 − 0.056 − 0.038** − 0.071**
poverty − 0.003** 0.001 − 0.003 − 0.002 − 0.003 − 0.006* − 0.007* − 0.010* − 0.009* − 0.010* − 0.009*
educ − 0.006** 0.002 0.008* 0.003 0.000 0.001 0.000 0.000 − 0.003 − 0.001 − 0.003
recession 0.039* 0.006 0.066** 0.063** 0.069* 0.070* 0.067* 0.038*** 0.030 0.039*** 0.052*
climate 0.041* 0.012 0.137* 0.139 0.258* 0.188* 0.210* 0.244* 0.404* 0.394* 0.388**
const 6.301 4.440 1.689 − 2.040 2.668 5.114** 2.702 4.622 0.163 2.688 − 0.600
Pseudo R2 0.4086 a
0.6078 0.5623 0.542 0.5212 0.4956 0.4646 0.4438 0.4377 0.4525
Hausman test 71.53; p = 0.000

Note:
The dependent variable is ln(energy). A robust standard error was used in models 1A and 3A to account for the possible problem of heteroscedastic and autocorrelated
error structure.
* indicate significance at the 1% levels, respectively.
** indicate significance at the 5% levels, respectively.
*** indicate significance at the 1%, 5% and 10% levels, respectively.
a
denotes R2 within statistics.

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