Economic growth and self-consumption in oil producing countries: Empirical evidence and perspectives

Abstract

The design of governmental policies is crucial to face the 21st Century economic growth challenges. Energy will be one of the core issues in economic growth policies. Therefore, this chapter focuses on the energy consumption-economic growth nexus. The perspectives on the role of energy use upon economic growth are grounded on empirical evidence from a panel of oil producing countries that have been examined for a long time span (1965-2012). Both the ratio of oil production to oil consumption, as well as the aftermath of the structural break from the second oil shock were controlled for. The presence of cross-section dependence phenomena within the panel strongly supports that these countries share common features as oil producers. Panel data estimators and co-integration/long memory analyses are both pursued and discussed, namely dealing with the heterogeneity of panels and the countries' specific effects. Comprehensive analysis of the energy-growth nexus requires that both short- and long-term effects should be considered, for which the Driscoll-Kraay estimator with fixed effects proved to be appropriate. The growth hypothesis was confirmed. Energy consumption and the ratio of oil production to oil consumption are drivers of economic growth. The structural break, beginning in 1979, seems to have been persistent. Findings support that expansionary governmental energy policies could not generate an equivalent effect upon the output in the 21st Century.