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Does energy consumption affect growth?

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Author Info

  • Saten Kumar

    ()
    (Department of Economics, Auckland University of Technology, Auckland, New Zealand.)

  • Don J. Webber

    ()
    (Department of Accounting, Economics and Finance, University of the West of England, Bristol, UK)

  • Antonio Paradiso

    ()
    (Department of Economics, University of Rome La Sapienza, Rome, Italy)

Abstract

A review of the literature reveals discrepancies between estimates of the impact of energy consumption on output and growth. This paper highlights the importance of underlying theoretical concerns, extends a neoclassical growth model to include energy consumption, applies panel data cointegration methods that deal with cross-sectional dependence and structural breaks to a sample of thirteen high energy consuming countries, and provides empirical estimates of the impact of energy consumption on output and growth. Results suggest that energy consumption has a permanent positive effect on output levels but has no statistically significant effect on growth. We suggest that rebound effects may confound the observable effects of energy on growth and that the effects on the environment of attempts to stimulate economic growth may never be forecast correctly ex ante.

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File URL: http://www.aut.ac.nz/__data/assets/pdf_file/0005/293108/Economics-WP-2012-04.pdf
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Bibliographic Info

Paper provided by Auckland University of Technology, Department of Economics in its series Working Papers with number 2012-04.

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Length: 23 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:aut:wpaper:201204

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Keywords: Energy consumption per capita; Level effect; Growth effect.;

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References

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  1. Stern, David I., 2000. "A multivariate cointegration analysis of the role of energy in the US macroeconomy," Energy Economics, Elsevier, vol. 22(2), pages 267-283, April.
  2. A. Greening, Lorna & Greene, David L. & Difiglio, Carmen, 2000. "Energy efficiency and consumption -- the rebound effect -- a survey," Energy Policy, Elsevier, vol. 28(6-7), pages 389-401, June.
  3. Carruth, A.A. & Hooker, M.A. & Oswald, A.J., 1998. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," The Warwick Economics Research Paper Series (TWERPS) 496, University of Warwick, Department of Economics.
  4. Smulders, J.A. & Nooij, M. de, 2003. "The impact of energy conservation on technology and economic growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-123121, Tilburg University.
  5. Arbex, Marcelo & Perobelli, Fernando S., 2010. "Solow meets Leontief: Economic growth and energy consumption," Energy Economics, Elsevier, vol. 32(1), pages 43-53, January.
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