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Energy prices, growth, and the channels in between: Theory and evidence

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  • Bretschger, Lucas

Abstract

The paper presents stylized cross-country evidence for a negative relationship between energy use and economic growth. Based on this motivation it develops a multisector framework to derive the growth impact of energy from first principles. The structural model is empirically estimated for a sample of 37 developed countries with five-year average data over the period 1975–2009. Estimations of both separate equations and simultaneous systems of equations are performed. The empirical results show a negative impact of energy use on investments in physical capital and knowledge formation. The estimations of simultaneous equations exhibit a dynamic effect of energy use: decreasing energy input and increasing energy prices induce additional investments fostering long-run growth. The growth effect counteracts the negative static effects of lower energy use.

Suggested Citation

  • Bretschger, Lucas, 2015. "Energy prices, growth, and the channels in between: Theory and evidence," Resource and Energy Economics, Elsevier, vol. 39(C), pages 29-52.
  • Handle: RePEc:eee:resene:v:39:y:2015:i:c:p:29-52
    DOI: 10.1016/j.reseneeco.2014.11.002
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    Cited by:

    1. repec:eee:resene:v:49:y:2017:i:c:p:1-15 is not listed on IDEAS
    2. Lucas Bretschger & Alexandra Vinogradova, 2015. "Equitable and effective climate policy: Integrating less developed countries into a global climate agreement," International Economics and Economic Policy, Springer, vol. 12(4), pages 437-467, October.
    3. Lucas Bretschger, 2010. "Sustainability economics, resource efficiency, and the Green New Deal," International Economics and Economic Policy, Springer, vol. 7(2), pages 187-202, August.
    4. repec:eco:journ2:2017-02-03 is not listed on IDEAS
    5. Lucas Bretschger, 2016. "Is the Environment Compatible with Growth? Adopting an Integrated Framework," CER-ETH Economics working paper series 16/260, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. Andreas Schaefer, 2017. "Enforcement of Intellectual Property, Pollution Abatement, and Directed Technical Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 457-480, March.
    7. Bretschger, Lucas, 2015. "Greening Economy, Graying Society," MPRA Paper 66218, University Library of Munich, Germany.
    8. Mundaca, Gabriela, 2017. "Energy subsidies, public investment and endogenous growth," Energy Policy, Elsevier, vol. 110(C), pages 693-709.

    More about this item

    Keywords

    Energy; Development; Capital accumulation; Panel data;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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