12 consume, electricity connection can be considered exogenous. Electricity is rarely used as the primary source of cooking with the exception of Albania, where 40 percent of electricity users reported using electricity to meet some or all of their cooking needs. The availability of electricity for connection is to a large degree exogenous to the household, reflecting public decisions taken by the energy and other ministries. Electricity connection often reflects the state of overall infrastructure (such as all-season roads), higher population density, and other factors that promote the development of an LPG market. The coefficient for electricity connection is expected to be positive in all countries except Albania. In Albania, if electricity was a competing energy source, its coefficient would be negative and should not be retained because it would no longer be exogenous. As seen in section 4.5, the coefficient was positive and was hence retained.

Where coefficients had the wrong sign—more specifically, a positive coefficient for the price of LPG and negative coefficients for the prices of other fuels, negative coefficients for asset indicators (house and car ownership, the number of rooms), a positive coefficient for engaging in agriculture, a negative coefficient for urban residence except in Pakistan, a negative coefficient for electrification except in Albania, and negative coefficients for the two education variables— or were statistically insignificant using a 5-percent significance test, the independent variables were not retained.<sup>3</sup> As explained in appendix 2, three corrections are made to total expenditure. First, the analysis is based on cash expenditures and the imputed value for food auto-consumption. The latter is included because non-purchased items (auto-consumption), particularly foodstuffs, often provide a large part of the total household consumption in developing countries. Second, where available, deflation factors to account for spatial and temporal differences in prices are used to deflate all food expenditures, both cash and imputed. The deflation factors were not available in India, Indonesia, and Mexico, while only one deflation index differentiating between rural and urban areas was available in Guatemala. Third, infrequent large expenditures, such as vehicle purchase, may unduly inflate total expenditure that is taken as an important determinant of choice and quantity of fuel consumed. To avoid possible distortions arising from such large purchases, expenditures on large durables are excluded in the calculation of total expenditure.

With data drawn from household expenditure surveys, the estimation of selection and consumption equations faces a number of issues that can limit the reliability of the results:

- (1) <u>Omitted variables. Arguably the most important variables on which there is no information</u> in the surveys are those related to the conditions of supply of various fuels. The distance to the nearest point of supply for both users and non-users for LPG and for other marketed as well as freely collected fuels, the frequency and duration of supply shortages, and the magnitude of price volatility will all affect the choice and use of LPG. In Pakistan, where natural gas is available for household use in many urban areas, virtually none of the households connected to natural gas used LPG, but no information was available on

> 3 In addition, the number of women not working was tested in nine countries that had this information. Increasing number of non-working women might signal more time available to devote to cooking and associated activities including biomass collection, and hence might be expected to be negatively associated with both LPG selection and consumption. In none of the countries, however, was this variable statistically significant and negative.