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

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

20 January 2024 | Ronald Djeunankan · Henri Njangang · Honoré Tékam Oumbé
This study examines the effect of economic complexity on energy poverty in 55 developing countries from 2000 to 2019. It uses the two-stage instrumental variable (IV-2SLS) approach to address potential endogeneity issues. The findings show that countries with higher economic complexity, characterized by diverse and sophisticated exports, experience lower levels of energy poverty. Human capital, income, and income inequality are identified as key transmission pathways through which economic complexity reduces energy poverty. The study suggests that developing countries should prioritize strategies to diversify production and export capabilities to meet Sustainable Development Goal 7. Energy poverty is defined as the inability to meet basic energy needs, such as cooking and heating, and is linked to health and well-being. While energy poverty is decreasing, significant challenges remain, with over 1.5 billion people lacking electricity access. Economic complexity, which reflects a country's knowledge and technological capabilities, is shown to influence energy poverty through improved energy efficiency, job creation, and higher income levels. This study contributes to the literature by analyzing the effect of economic complexity on energy poverty for the first time in developing countries and identifying key mechanisms through which economic complexity alleviates energy poverty. It also highlights the importance of considering economic complexity in energy poverty reduction strategies.This study examines the effect of economic complexity on energy poverty in 55 developing countries from 2000 to 2019. It uses the two-stage instrumental variable (IV-2SLS) approach to address potential endogeneity issues. The findings show that countries with higher economic complexity, characterized by diverse and sophisticated exports, experience lower levels of energy poverty. Human capital, income, and income inequality are identified as key transmission pathways through which economic complexity reduces energy poverty. The study suggests that developing countries should prioritize strategies to diversify production and export capabilities to meet Sustainable Development Goal 7. Energy poverty is defined as the inability to meet basic energy needs, such as cooking and heating, and is linked to health and well-being. While energy poverty is decreasing, significant challenges remain, with over 1.5 billion people lacking electricity access. Economic complexity, which reflects a country's knowledge and technological capabilities, is shown to influence energy poverty through improved energy efficiency, job creation, and higher income levels. This study contributes to the literature by analyzing the effect of economic complexity on energy poverty for the first time in developing countries and identifying key mechanisms through which economic complexity alleviates energy poverty. It also highlights the importance of considering economic complexity in energy poverty reduction strategies.
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Understanding Examining the Effect of Economic Complexity on Energy Poverty in Developing Countries