The ‘vicious cycle’ of energy poverty and productivity: insights from 45 developing countries

Abstract

This study is the first proper attempt to examine the influence of energy poverty on productivity. Specifically, the study investigates the effects on the level and convergence of total factor productivity of no access to clean fuels and technologies for cooking; no access to electricity in the total population; no access to electricity in the rural population; no access to electricity in the urban population; non-renewable electricity production; and non-renewable electricity consumption. The study examines a global sample of 45 developing countries from 2002 to 2017 and offers three empirical analysis findings. First, the mutual causalities between the five dimensions of energy poverty and total factor productivity are shown by a non-Granger causality test for panel data, except one-direction causality from no access to clean fuels and technologies for cooking to total factor productivity convergence, which hints a ‘vicious cycle’ of two variables. Second, the two-step system generalised method of moments estimates show significant negative impacts of no access to clean fuels and technologies for cooking and the three variables of no access to electricity on total factor productivity. In contrast, the production and consumption of non-renewable electricity appear to have significant positive effects. Third, the three-stage least squares estimates provide statistical evidence that the effects of energy poverty on total factor productivity are transmitted through human capital accumulation, Internet usage, and the shadow economy.