An analysis of the energy intensity of Latin American and Caribbean countries: Empirical evidence on the role of public and private capital stock

Abstract

In this study, we analysed the role of public and private capital stock in the energy intensity of 21 Latin American and Caribbean (LAC) countries from 1970 to 2014. The empirical analysis of this study was based on three methodologies, namely: 1) the panel autoregressive distributed lag (P-ARDL) model; 2) the log t regression test method and the club clustering algorithm, and 3) the ordered-logit regression model. The results from our analysis indicated that, although the decreasing trend of LAC energy intensity, the public and private capital stocks did not contribute to this trend, given that they seem to have had an enhancing effect on long-run LAC energy intensity. We also identified the existence of four convergence in terms of energy intensity, with different transition paths and different levels. By the ordered logit estimation, we found that neither the public nor private capital stocks are determinant in club convergence/formation. The overall conclusion is that LAC governments should increase investment in more energy-efficient equipment and infrastructure. This should be done at the same time as they create, or improve, the laws and the regulatory framework regarding energy efficiency, and create incentives to allow private physical capital to follow the same tendency.