Asymmetric and moderating role of industrialisation and technological innovation on energy intensity: Evidence from BRICS economies

Abstract

The present research explores the effect of economic growth, technological innovation, trade openness, and industrialisation on energy intensity in the BRICS economies using a dataset from 1990 to 2019. Furthermore, this study evaluates the combined effects of industrialisation and technological innovation on energy intensity. We employed second-generation approaches such as Westerlund co-integration, method of moments quantile regression (MMQR), and panel causality. In addition, we conducted a robustness analysis by using the long-run estimators including the dynamic ordinary least square (DOLS), fully modified ordinary least square (FMOLS) and fixed effect-ordinary least square (FE-OLS). The MMQR allows for a heterogeneous income-energy intensity nexus at different conditional quantile distributions of energy intensity, which the conventional mean regressions would generally ignore. The empirical evidence from the MMQR confirms that economic growth and industrialisation contribute to higher energy intensity; meanwhile, trade openness and technological innovation decrease the energy intensity. The combined effects of industrialisation and technological innovation reduce energy intensity in the BRICS economies. The outcomes from the MMQR are supported by the DOLS, FMOLS, and FE-OLS estimators. Furthermore, the causal interaction between the energy intensity drivers is also investigated using the Dumitrescu-Hurlin panel causality tests, which reveal that industrialisation and technological innovation Granger cause energy intensity. Meanwhile, a bidirectional causal interaction between economic growth and energy intensity is found, as well as between trade openness and energy intensity. Policymakers must design industrial policies that promote technological innovation, which is the mechanism of inhibiting industrialisation.