Abstract
This paper examines the role played by institutional quality in the relationship between foreign direct investment and energy consumption in Côte d'Ivoire. Using data from the World Bank and International Country Risk Guid over the period 1984-2014 and the Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) methods, we account for the joint effects of institutional quality and foreign direct investment on energy consumption. The results reveal that a high level of democracy attenuates the negative effects of FDI flows on energy consumption. This result shows that improving and strengthening democratic institutions has a positive influence on energy efficiency incentive policies by changing the composition of FDI towards clean technology sectors, such as the service sector.
Highlights
Energy consumption or use which means, “the use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport” (World Bank, 2020), is considered crucial in the development process (Kraft and Kraft, 1978; Ozturk and Acaravci, 2010)
Rather than analysing a wide range of heterogeneous factors that could explain such a discrepancy between theoretical predictions and empirical results, this study focuses on institutional quality to identify the role played by the institutional environment in the transmission chain of the effects of foreign direct investment on energy consumption in Cote d’Ivoire
FDI has a high coefficient of variation, followed by the institutional quality variable and the energy consumption variable
Summary
Energy consumption or use which means, “the use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport” (World Bank, 2020), is considered crucial in the development process (Kraft and Kraft, 1978; Ozturk and Acaravci, 2010). Rather than analysing a wide range of heterogeneous factors that could explain such a discrepancy between theoretical predictions and empirical results, this study focuses on institutional quality to identify the role played by the institutional environment in the transmission chain of the effects of foreign direct investment on energy consumption in Cote d’Ivoire. In this sense that various studies have shown that democracy, considered as a metainstitution, has an impact on the environment and environmental policy-making. The remainder of the paper is arranged as follows: Section 2 introduces the methodology and data, section 3 presents the empirical results, section 4 addresses the estimation results and section 5 concludes this paper and outlines policy implications
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