Economic and Institutional Determinants of Residential Electricity Demand in MENA Countries: A Dynamic Panel Analysis

Abstract

Residential electricity consumption has become a major concern for energy policy in the MENA region, where rising electricity demand is accompanied by profound economic and institutional transformations. However, comparative evidence across MENA countries remains limited, short- and long-run adjustments are rarely examined within a unified framework, and institutional factors are still insufficiently incorporated into empirical analyses. To address these gaps, this study investigates the economic and institutional determinants of residential electricity consumption in a panel of six MENA countries (Morocco, Algeria, Tunisia, Egypt, Jordan, and Turkey) over the period 1990–2023 using a dynamic panel error correction model. The results confirm the existence of a long-run equilibrium relationship, with a negative and statistically significant error correction term (−0.048), indicating that approximately 4.8% of the disequilibrium is corrected annually. In the short run, household final consumption expenditure has a positive and statistically significant effect on residential electricity demand (0.147), whereas the effect of the real electricity price is statistically insignificant (−0.016), indicating limited consumer responsiveness to short-term price changes. In the long run, household consumption expenditure remains the main driver of residential electricity demand (0.808), while price elasticity is negative but statistically insignificant (−0.096), reflecting the persistent influence of electricity price regulation and subsidy schemes. Drawing on a qualitative comparison of regulatory frameworks and electricity sector reforms, the analysis further shows that countries with more liberalized electricity markets exhibit greater price responsiveness. By jointly incorporating economic and institutional dimensions, this study contributes to the comparative literature on residential electricity demand in the MENA region and provides policy insights for tariff design, subsidy reform, and energy transition strategies.

JEL Classification : Q41, C32, O13.

Paper Type : Empirical research.