The endowment cost: Is natural resource dependence doom to low energy efficiency?

This study examines the relationship between natural resource rents and energy efficiency in 129 developing countries over the period 2000–2019 using panel data techniques. Energy efficiency is defined as the ability to generate higher economic output with a given amount of energy input; consequently, an increase in energy intensity measured as energy consumption per unit of output reflects a decline in energy efficiency, as more energy is required to produce the same level of economic activity. Results from both static estimations (Pooled Ordinary Least Squares and Panel-Corrected Standard Errors) and dynamic analysis using the System Generalized Method of Moments consistently show that higher natural resource rents are associated with lower energy efficiency. Quantitatively, a one-percentage-point increase in natural resource rents leads on average to a statistically significant rise in energy intensity, indicating a deterioration in energy efficiency across developing economies and providing evidence of an “energy efficiency curse.” To ensure robustness, energy efficiency is alternatively measured using Data Envelopment Analysis (DEA), a non-parametric approach that assesses relative efficiency by comparing energy inputs to economic outputs across countries, and the results confirm the negative and significant impact of natural resource rents on energy efficiency. From a policy perspective, these findings underscore the need for resource-rich developing countries to embed energy efficiency objectives into natural resource governance by promoting energy-saving technologies, implementing appropriate energy pricing reforms, and strengthening institutional frameworks that incentivize efficient energy use.