Energy Productivity, Energy Dependence and Economic Growth in extended Europe

Purpose: Energy is used in all areas of production and is crucial for economic growth. This study aims to empirically analyze the relationship between energy productivity, economic growth, and energy use in 35 European countries, for the period of 1990-2015. Methodology: European countries are divided into two groups, namely developed and developing economies. To account for structural breaks, a panel cointegration test that allows for multiple structural breaks is applied to two groups of countries. Findings: Multiple breaks are found by the Westerlund (2006) test in the group of emerging countries, suggesting that energy policies within Europe should differ by country. Structural breaks in emerging European economies suggest that these countries are more fragile to both external and internal shocks. The results of the study also show that economic growth in developing countries increases energy dependency, while economic growth in developed European countries causes an increase in energy efficiency. Originality: This study aims to enrich the literature in two aspects. First, it analyzes energy dependence and efficiency at the same time. Secondly, it examines developed and developing European countries in two separate sub-samples by observing structural breaks in the relationship between energy dependence, energy efficiency and growth.