Abstract
This study analyses the relationship between energy consumption and economic growth, using annual panel data from 16 Latin American countries over the period 1971–2001. We use a random coefficient (RC) method to control for both finite sample and sample-heterogeneity biases. Our results show (1) a long-run relationship between real GDP, energy consumption, labour force and real capital stock and (2) a long-run unidirectional causality running from energy to economic growth. These results support the energy-driven growth hypothesis.
Notes
1 Because of a methodological change in the reporting of labour force data by the World Bank, it was not possible to extend the sample beyond 2001.
2 In the case of the coefficients on energy, Venezuela has the wrong sign, which is due to the data quality.
3 Tests are available upon request.
4 According to , there are only two cases (Mexico and Bolivia) where causality does not exist (the neutrality hypothesis).