Modelling the nexus between human capital, income inequality, and energy demand in India: new evidences from asymmetric and non-linear analysis.

Abstract

The growth stimulating effect of energy has been long established in economic literature. Consequently, researchers and policy makers are trying to identify socio-economic determinants of energy consumption in both developed and developing countries to conserve energy. In the present study, we attempt to examine the non-linear and asymmetric effect of human capital and income disparity on energy demand in India over the period 1970-2014. The findings propose long-run co-integrating relationship between human capital, income inequality, and energy demand in the presence of asymmetric framework. It is found that increased level of human capital results in energy conservation as it decreases the energy demand, and higher income gap also results in lower energy demand as poor section may have restricted access to energy sources. Finally, the asymmetric causality test results reveal that only positive shock in income inequality tends to cause energy demand. From policy stand point, it can be recommended that government policies should be designed and implemented towards improvements in human capital to achieve sustainable economic growth in India since human capital found to be a significant component in energy conservation.