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Does energy infrastructure spur total factor productivity (TFP) in middle-income economies? An application of a novel energy infrastructure index

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  • Ur Rehman, Faheem
  • Islam, Md. Monirul

Abstract

Even though there are numerous empirical investigations on energy consumption's impact on economic growth, the relationship between energy infrastructure and total factor productivity (TFP) appears to be understudied in academic literature. The present study examines the dynamic nexus between energy infrastructure and TFP for the panel data of 67 upper and middle-income countries during 1990–2019.First, we contribute to devising a comprehensive energy infrastructure index by covering qualitative and quantitative dimensions of energy resources using the unobserved-component model.Second, this study investigates the short and long-run relationship between the variables using the cross-sectional autoregressive distributed lag (CS-ARDL) approach. The investigation procedure confirms that energy infrastructure significantly and positively increases TFP in both the long and short run. In addition, diverse macroeconomic dynamics, e.g., foreign direct investment, human capital, technological advancement and trade openness, also positively influence TFP in these countries.Third, by categorizing the sample into upper-middle income and lower-middle income countries, this study finds higher coefficients of the energy infrastructure of the upper-middle-income group than the lower-middle-income economies to stimulate TFP. Furthermore, this study's results remain robust across the alternate estimation parameter, the wavelet coherence analysis technique.Finally, the study proposes some significant policy suggestions.

Suggested Citation

  • Ur Rehman, Faheem & Islam, Md. Monirul, 2023. "Does energy infrastructure spur total factor productivity (TFP) in middle-income economies? An application of a novel energy infrastructure index," Applied Energy, Elsevier, vol. 336(C).
    • Handle: RePEc:eee:appene:v:336:y:2023:i:c:s0306261923002003
    DOI: 10.1016/j.apenergy.2023.120836
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    2. Fu, Tong & Li, Zijun & Qiu, Zhaoxuan & Tong, Xinle, 2024. "The policy gap between finance and economy: Evidence from China's green finance policy," Energy Economics, Elsevier, vol. 134(C).
    3. Huwei Wen & Jinxia Zhan, 2023. "New-type infrastructure and total factor productivity: evidence from listed manufacturing firms in China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4465-4489, December.

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    More about this item

    Keywords

    Energy; Total factor productivity; Upper and middle-income countries; CS-ARDL technique; Wavelet coherence analysis;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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