An inquiry into the nexus between energy poverty and income inequality in the light of global evidence

Abstract

The study investigates the nexus between energy poverty and income inequality from multiple perspectives by drawing on a rich set of global data and applying a novel set of comprehensive empirical approaches. In so doing, analysis of energy poverty is carried out from five different dimensions, and its nexus with two aspects of income inequality is explored. The empirical analysis strategy entailed panel Granger causality, two-stage least squares, three-stage least squares, and two-step system GMM approaches for the robustness of inferences. Based on data availability, the dataset constituted a global sample of 51 economies from 2002 to 2014. Our key findings suggest that there is significant evidence of Granger causality between energy poverty and income inequality. Notably, an increase in income inequality causes higher energy poverty. In return, a decrease in energy poverty appears to reduce income inequality. The analysis of low- and lower-middle-income economies, as well as upper-middle-income economies, yields consistent auxiliary findings that provide robustness to our analysis and inferences. The findings have important implications for policymakers and stakeholders interested in the reduction of energy poverty and income inequality.