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The relationship between energy intensity and economic growth: New evidence from a multi-country multi-sectorial dataset

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  • Deichmann, Uwe
  • Reuter, Anna
  • Vollmer, Sebastian
  • Zhang, Fan

Abstract

This paper revisits the relationship between energy intensity and economic growth, using a flexible piecewise linear regression model. Based on a panel data set of 137 economies during 1990–2014, the analysis identifies a threshold effect of income growth on energy intensity change: although energy intensity is negatively correlated with income growth throughout the entire sample and study period, the declining rate significantly slows by about 25 percent after the level of per capita income reaches $5,000. Based on index decomposition, the analysis also finds that although structural change is important for intensity levels in all countries, the efficiency effect is more important in higher-income countries. The results suggest that one can expect to see relatively rapid reduction in energy intensity as the economies in today’s poor countries grow. However, when countries move beyond lower-middle-income levels, energy efficiency policies become far more critical for sustaining the rate of reduction in energy intensity.

Suggested Citation

  • Deichmann, Uwe & Reuter, Anna & Vollmer, Sebastian & Zhang, Fan, 2019. "The relationship between energy intensity and economic growth: New evidence from a multi-country multi-sectorial dataset," World Development, Elsevier, vol. 124(C), pages 1-1.
    • Handle: RePEc:eee:wdevel:v:124:y:2019:i:c:1
    DOI: 10.1016/j.worlddev.2019.104664
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    More about this item

    Keywords

    Energy intensity; Economic growth; Energy efficiency; Piecewise linear regression; Structural change;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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