Household Electricity Approach - Formula

Formula

1nE + I = α₁1nC_i + α₂G_i + α₄Q_i + αH_i + α₆
H_i = β₁T_i + β₂(S_i – T_i) + β₃D_i
β₁>0 β₂ <0 β₃ >0

where:

i : the number assigned to the country

E_i : per capita household electricity consumption in country i in Mtoe

C_i : per capita real consumption of households without the consumption of electricity in country i in US dollars( purchasing parity)

PR_i : the real price of consumption of 1kwh of residential electricity in US dollars(at purchasing parity)

G_i : the relative frequency of months with the need of heating in houses in country i

Qi : the ratio of energy sources other than electric energy to all energy sources in household energy consumption

H_i : the per capita output of the hidden economy

T_i : the ratio of the sum of paid personal income, corporate profit and taxes on goods and services to GDP

S_i : the ratio of public social welfare expenditures to GDP

D_i : the sum of number of dependants over 14 years and of inactive earners, both per 100 active earners

(Lacko 1998, p. 133)

After the total electricity consumption of households has been determined, the next step is to proceed to find the informal economy’s contribution to the GDP of a country (Lacko 1998, p. 140). To create this index, Lacko had to determine a way to calculate how much GDP is produced by one unit of electricity (Lacko 1998, p. 140). This was done by taking known estimations of a market economy and making comparisons with this to another approach (Lacko 1998, p. 140).