Analysing the role of energy in economic growth and convergence: a cross-country study from 1980–2019

We analysed the contribution of energy to cross-country economic growth and convergence since 1980 using a sample of 94 countries. The world production frontier is constructed using the Data Envelopment Analysis method, which derives the production possibilities set using linear combinations of countries’ input-output observations. By extending the traditional production frontier approach to include energy as an additional factor of production besides labour and physical capital stock, we decompose economic growth into components attributable to technological catch-up (movement towards or away from the production frontier), technological change (shifts in the world production frontier), and changes in factors inputs per unit of labour (movement along the production frontier). The latter is further decomposed into two components attributable to capital accumulation and change in energy use. Our findings indicate that energy use is a critical driver of the observed convergence in the twenty-first century.