Sustainable economic growth and energy security nexus: A stochastic frontier analysis across OECD countries

Abstract

This study aims to provide a comprehensive picture of the sustainable economic growth undertaken by 22 OECD countries from 2005 to 2021. Sustainable economic growth is conceived as environmental-economic efficiency, that is the ability to increase GDP while reducing greenhouse gas (GHG) emissions. An efficiency effect frontier model is employed to simultaneously estimate the production frontier, technical inefficiency, and the effects of a composite set of institutional drivers that includes environmental taxation, economic globalization, and energy security. This study makes several contributions. Firstly, it expands upon the traditional single-output stochastic frontier model by incorporating a multi-output distance function. Secondly, it includes GHG emissions as an undesirable output in the analysis, providing unbiased assessments of sustainable economic growth. Thirdly, it explores the effects of an under-investigated institutional variable that has become crucial amid the current geopolitical uncertainty: the energy self-sufficiency represented by the energy import independence. Empirical results shed light on a decreasing trend in environmental-economic efficiency that started in 2009 and worsened during the Covid-19 pandemic. Furthermore, environmental taxation and economic globalization have curbed efficiency. Lastly, energy self-sufficiency has been revealed as a crucial driver to enhance the green growth of OECD countries.