Examining the Effect of Economic Complexity on Energy Poverty in Developing Countries

Examining the Effect of Economic Complexity on Energy Poverty in Developing Countries

2024 | Ronald Djeunankan, Henri Njangang, Honoré Tékam Oumbé
This study examines the impact of economic complexity on energy poverty in 55 developing countries from 2000 to 2019. Using a two-stage instrumental variable (IV-2SLS) approach, the authors instrument a country's economic complexity level with the average of the economic complexity index of three countries with similar specialization patterns but no geographical proximity. The findings indicate that countries producing and exporting a diverse range of sophisticated products generally experience lower levels of energy poverty. The study also identifies human capital, income, and income inequality as key transmission pathways through which economic complexity can alleviate energy poverty. The research contributes to the literature by being the first to analyze the effect of economic complexity on energy poverty in developing countries, using per capita electricity consumption as a measure of energy poverty, and employing an advanced instrumental variable method to address endogeneity issues. These findings suggest that economic strategies aimed at diversifying production capacities and export packages should be a top priority for developing nations to achieve Sustainable Development Goal 7 (SDG 7).This study examines the impact of economic complexity on energy poverty in 55 developing countries from 2000 to 2019. Using a two-stage instrumental variable (IV-2SLS) approach, the authors instrument a country's economic complexity level with the average of the economic complexity index of three countries with similar specialization patterns but no geographical proximity. The findings indicate that countries producing and exporting a diverse range of sophisticated products generally experience lower levels of energy poverty. The study also identifies human capital, income, and income inequality as key transmission pathways through which economic complexity can alleviate energy poverty. The research contributes to the literature by being the first to analyze the effect of economic complexity on energy poverty in developing countries, using per capita electricity consumption as a measure of energy poverty, and employing an advanced instrumental variable method to address endogeneity issues. These findings suggest that economic strategies aimed at diversifying production capacities and export packages should be a top priority for developing nations to achieve Sustainable Development Goal 7 (SDG 7).
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[slides and audio] Examining the Effect of Economic Complexity on Energy Poverty in Developing Countries