The Role of Institutions in Energy Transition and Economic Growth in West Balkan Countries

Gazmend Amaxhekaj, Driton Qehaja and Atdhetar Gara

Economic Studies journal, 2024, issue 3, 18-45

Abstract: This article investigates the impact of institutional quality on accelerating the energy transition in the Western Balkans. The region's heavy dependence on energy means the transition to cleaner energy sources will affect GDP growth. However, improving institutional quality can speed up the process by increasing energy efficiency, reducing pollution, and decreasing reliance on energy imports. The Western Balkan countries must adopt the EU's goal of energy transition and reducing CO2 emissions as part of their path to joining the European Union. However, institutional factors such as corruption, weak governance, political instability, and the rule of law have hindered individual countries' progress. This study used data from the World Development Indicator and the International Energy Agency from 2005 to 2020 to investigate the relationship between institutions, energy transition, and economic growth in the Western Balkans. The study employed four econometric models using random and fixed effects regression methods. The results revealed a positive and statistically significant impact from CO2 emissions, governance effectiveness, final consumption expenditures, and trade openness in total energy consumption. Conversely, GDP per capita, the deterioration of controlling corruption and political stability have a negative impact on total energy consumption. In contrast, control of corruption significantly impacts renewable energy growth. The findings also revealed that, even though the increase in total energy consumption raises GDP, it negatively impacts GDP per capita due to energy inefficiency and a large portion of the energy expenses from individual incomes. In contrast, renewable energy consumption positively impacts GDP and GDP per capita.

JEL-codes: O43 Q01 Q40 Q48 (search for similar items in EconPapers)
Date: 2024
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