Do fossil fuel and renewable energy consumption affect total factor productivity growth? Evidence from cross-country data with policy insights

This study examines whether types of energy consumption affects the total factor productivity (TFP) growth. Using annual data of 1981–2013 for the panel sample of 36 countries, the results show that fossil fuel consumption declines the TFP growth, whereas, renewable energy consumption boosts the TFP...

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Bibliographic Details
Published in:Energy policy 2019-04, Vol.127, p.186-199
Main Authors: Rath, Badri Narayan, Akram, Vaseem, Bal, Debi Prasad, Mahalik, Mantu Kumar
Format: Article
Language:English
Subjects:
C33
Causality
CIPS unit root test
Economic models
Energy consumption
Energy policy
Environmental quality
Feedback
Fossil fuels
Fuel consumption
Fuels
Hypotheses
O47
Panel causality
Panel cointegration
Panel data
Productivity
Q43
Renewable energy
Renewable resources
Total factor productivity growth
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Summary:This study examines whether types of energy consumption affects the total factor productivity (TFP) growth. Using annual data of 1981–2013 for the panel sample of 36 countries, the results show that fossil fuel consumption declines the TFP growth, whereas, renewable energy consumption boosts the TFP growth. However, the results vary across different sub-panels. Further, the results from panel Granger causality support the feedback hypothesis in the long-run, whereas, weak evidence is found in the short-run. Since our findings supported feedback hypothesis, thus, policy should focus on reducing fossil fuel and using more renewable energy for achieving a ‘‘win-win’’ position of sustainable higher productivity growth with protective environmental quality in the long-run. •Evaluate the effect of fossil fuel and renewable energy consumption on productivity growth.•An evidence of a long-run relationship between energy and productivity growth.•Fossil fuel consumption declines productivity growth, whereas, renewable energy consumption boosts the productivity growth.•Panel Granger causality support the feedback hypothesis only in the long-run.
ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2018.12.014