Sustainable energy development in an era of geopolitical multi-crisis. Applying productivity indices within institutional framework

Abstract

The term “multi-crisis” refers to the occurrence of multiple crises simultaneously, often stemming from geopolitical risks. These risks can cause societal disruption and political instability in times of uncertainty, as evidenced by the water crisis, stagflation, COVID-19, population growth, and wars. Hence, it is critical to mitigate geopolitical risks and promote peace. These risks can have significant impacts on government effectiveness, the rule of law, and political stability. Our study focuses on how the above institutional variables can influence the overall productivity of G20 economies. We measure total factor productivity (TFP) using Malmquist (MPI) and Malmquist-Luenberger (MLPI) productivity indices with a bootstrap approach. We compare the TFP of G20 economies, decomposed into G7, BRICS, and other G20 countries excluding the European Union, and find that on average, the BRICS have achieved higher TFP than the G7. The G7 performance is primarily driven by innovation, while the BRICS performance can be attributed to catching-up activities. Interestingly, weaker democratic institutions are paradoxically linked to higher productivity performance in the G20.