The influences of government spending on energy poverty: Evidence from developing countries

Abstract

The literature has documented different determinants of energy poverty, i.e., income poverty, energy price, technology, and financial development. Meanwhile, government policies through public spending might play a critical role in alleviating energy poverty, but little attention has been paid to this factor. This study endeavours to investigate the effects of government spending on energy poverty in a global sample of 56 developing countries. Specifically, the study firstly examines the influence of government spending on four proxies of energy poverty. Secondly, we examine the role of institutional quality as the rule of the game in society, in the effects of government spending. Lastly, we investigate the channels of the effects of government spending on energy poverty. Applying several panel estimates, the significance of the results is threefold. First, government spending has a U-shaped effect on energy poverty, implying that increases in government spending may alleviate energy poverty until a certain level; however, from this tipping point, any excessive spending would be harmful to energy prosperity. Second, institutional quality serves as a critical catalyst in shaping the effects of government spending. Third, the effects of government spending are found to be transmitted through two channels: economic growth and income inequality.