The impact of urbanization on energy intensity: Panel data evidence considering cross-sectional dependence and heterogeneity

Abstract

As population grows considerably in the world, the correlation between intensity of population in urban areas and energy intensity becomes an important issue in energy field. This paper aims at examining the effects of urbanization on energy intensity for 10 Asian countries by employing annual data from 1990 to 2014. The Asian countries are Bangladesh, China, India, Indonesia, Malaysia, Nepal, Philippines, South Korea, Thailand and Vietnam, respectively. To this end, the paper, first, follows cross-sectional dependence and heterogeneity tests. Then, the paper conducts unit root and cointegration tests, cointegration analyses and causality analyses. Finally, the paper estimates the short run parameters as well as long-run parameters to capture the possible dynamic relationships among variables.

This paper, thus, employs energy intensity as dependent variable and GDP per capita, the square of GDP per capita, urbanization, and ruralization as regressors within the relevant models and explores that there exists a long-run relationship of energy intensity with GDP per capita, the square of GDP per capita, urbanization, and ruralization in panel data.

The paper, later, observes additional explanatory variables of export, renewable energy consumption and nonrenewable energy consumption, and, concludes that (i) the urbanization variable has significant influences on energy intensity in the short-run and long-run, (ii) despite the some differences in cross-sectional estimations, the Asian panel data, overall, yield negative impact of urbanization on energy intensity. The latter output indicates that the urbanization path increases the energy productivity in Asian panel models. Within this scope, the paper presents some policy proposals related to the reduction of energy intensity in Asia.