Does renewable and/or non-renewable energy consumption matter for total factor productivity (TFP) growth? Evidence from the BRICS

Abstract

Studies proved that output growth is mainly associated with the Total Factor Productivity (TFP) growth and variables that affect the TFP have an important explanatory power on output. In this regards, the aim of this study is to examine the causal relationship between different types of energy consumption and TFP growth in the BRICS from 1992 to 2012. A panel bootstrap Granger causality test by Kónya (2006) [68] was employed to investigate the direction of possible connection between energy consumption and TFP growth. Results show that no remarkable causal link exists between renewable energy consumption and TFP growth in the BRICS. However, in the case of non-renewables, energy consumption creates a positive externality that contributes economic development in Brazil and South Africa by the growth of TFP as well as energy use itself. In this respect, policies that promote coal and non-renewable electricity consumption in South Africa and natural gas consumption in Brazil may be beneficial for their economic development.