Does urbanization cause energy consumption amidst globalization and FDI in South Asia? A pooled mean group estimation

Abstract

Purpose

The purpose of this study is to examine the influence of urbanization on energy consumption, including economic growth, globalization and “foreign direct investment (FDI)” inflow as control variables.

Design/methodology/approach

This study uses yearly panel data from 19071 to 2018 on five selected South Asian economies. It applies the “pooled mean group (PMG)” estimator and the “Dumitrescu-Hurlin (D-H)” panel causality test.

Findings

The PMG estimators reveal that urbanization causes energy consumption negatively in the long run because of an unusual and messy urbanization process. At the same time, it has no impact on the latter in the short run. Per capita income has both long- and short-run positive influences on energy use. Globalization causes energy consumption positively in the long run but does not affect it in the short run. FDI inflow has a strong positive impact on energy use in the long run and adverse effects in the short run. The Dumitrescu–Hurlin causality test reveals feedback relationships between “urbanization and energy consumption,” “globalization and energy consumption” and one-way causation from “per capita income to energy consumption.” It validates the findings of the PMG estimators.

Practical implications

The results of this study indicate that South Asia may focus on enhancing the availability of energy in the region and producing more renewable energy to add to its energy portfolio to meet growing energy demand, particularly among urban dwellers. Moreover, they should raise their real per capita incomes and augment the standard of living of low-income city dwellers to make urbanization more serviceable and comfortable.

Originality/value

This study is original. As far as the author is aware, this is a maiden attempt to investigate urbanization's effects on energy usage in South Asia in the preview of globalization and FDI.

Citation

Islam, M.S. (2024), "Does urbanization cause energy consumption amidst globalization and FDI in South Asia? A pooled mean group estimation", International Journal of Energy Sector Management, Vol. 18 No. 3, pp. 639-657. https://doi.org/10.1108/IJESM-02-2023-0015