Machinery import, R&D spillover, and energy efficiency

Abstract

The gap in demand and supply of energy across Sub-Saharan African (SSA) countries has increased energy insecurity in the region. Therefore, power outages have become pervasive, causing unemployment and a decline in production output. Among the several energy-saving factors identified in the literature across developing economies, technological spillover driven by trade openness appears to be a prominent factor in improving energy efficiency. Thus, this study evaluates the impact of machinery imported from OECD and non-OECD countries and its corresponding research and development (R&D) spillover on energy efficiency performance in 18 SSA countries from 1995 to 2017. Using a stochastic energy distance function, we discover that aggregated data from OECD and non-OECD countries have no significant effect on energy efficiency performance across SSA countries. However, results from disaggregated data for OECD and non-OECD machinery imports show that OECD machinery imports improve energy efficiency contrary to non-OECD imports. Thus, technology spillover from OECD countries is advantageous for SSA countries to reduce long-term energy-based emissions. Furthermore, our results show that human capital has no significant effect on SSA energy efficiency. Consequently, the results possess some policy implications; for instance, policymakers responsible for promoting science and technology could increase investment in human capital development by developing technology and engineering expertise and increasing GDP allocation to R&D activities. For energy efficiency scores, we observe substantial differences in efficiency across SSA countries – implying potential improvements in energy efficiency across SSA countries.