Urban concentration, non-renewable energy consumption, and output: do levels of economic development matter?

Abstract

The accelerated urbanization process generates a significant increase in energy, whose sources are mainly polluting. The harmful effects of both processes are reflected in climate change. This article examines the equilibrium and causality relationship among urban concentration, non-renewable energy consumption, and the real per capita output in 110 countries during 1971-2017. Using data from the World Bank's World Development Indicators (2018), we classify countries into four groups according to their level of development. Our evidence suggests that urban concentration has a negative effect on real per capita output in high-income countries, while non-renewable energy consumption has a positive effect on all groups of countries. The cointegration tests show that there is short- and long-term equilibrium in all groups of countries. The results of the DOLS and PDOLS models indicate that the strength of the cointegration vector is weak in most of the countries and groups analyzed. The Granger-type causality tests show that there is bidirectional causality from the real per capita output to the urban concentration in high and middle-low-income countries. There is unidirectional causality from the population concentration towards the real per capita output in the low-income countries; from the non-renewable energy consumption to the real per capita output in high-income countries; from the real per capita output to the non-renewable energy consumption in the countries of medium-high and medium-low income; and from urban concentration to non-renewable energy consumption in high- and medium-high-income countries. Our results highlight the importance of promoting policies of urban planning and generation and consumption of renewable energy without limiting the expansion of the output.