Relationship between Energy Intensity and Economic Growth: New Evidence from a Multi-Country Multi-Sector Data Set

25 Pages Posted: 31 Jan 2018 Last revised: 11 Apr 2018

See all articles by Uwe Deichmann

Uwe Deichmann

World Bank - Development Research Group (DECRG)

Anna Reuter

University of Goettingen (Göttingen)

Sebastian Vollmer

University of Goettingen (Göttingen)

Fan Zhang

World Bank

Date Written: January 30, 2018

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 more than 30 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 when countries move beyond lower-middle-income levels, energy efficiency policies become far more critical for sustaining the rate of improvement in energy efficiency.

Keywords: Industrial Economics, Economic Growth, Economic Theory & Research, Climate Change Mitigation and Green House Gases

Suggested Citation

Deichmann, Uwe and Reuter, Anna and Vollmer, Sebastian and Zhang, Fan, Relationship between Energy Intensity and Economic Growth: New Evidence from a Multi-Country Multi-Sector Data Set (January 30, 2018). World Bank Policy Research Working Paper No. 8322, Available at SSRN: https://ssrn.com/abstract=3113873

Uwe Deichmann (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Anna Reuter

University of Goettingen (Göttingen)

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Sebastian Vollmer

University of Goettingen (Göttingen) ( email )

Platz der Göttinger Sieben 3
Göttingen, 37073
Germany

HOME PAGE: http://sebastianvollmer.wordpress.com/

Fan Zhang

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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