Income Inequality and Energy Consumption in Africa: A Nonlinear Dynamic Panel Threshold Analysis of Financial and Governance Moderation Effects

Emin Efecan Aktaş

Politická ekonomie, vol. preprint

Abstract: This study investigates the intricate relationships among energy consumption, income inequality, financial development, and governance quality in the African region. Focusing on African countries characterized by prevalent energy poverty, weak governance, and underdeveloped financial systems, the moderating role of income inequality on energy consumption is examined using a dynamic panel threshold model. The primary objective is to elucidate the nonlinear nature of these relationships and identify how their effects vary depending on income inequality thresholds. The analysis encompasses 21 sub-Saharan and 5 North African countries over the period 1985-2021, utilizing indicators sourced from various databases. Following preliminary tests, the study employs the dynamic panel threshold method developed by Diallo (2020), which builds on Hansen\'s (1999) threshold modelling framework. Below the income inequality threshold, financial development and government quality exhibit a positive relationship with energy consumption. Above this threshold, the relationship turns negative due to heightened inequality. This study enhances the literature on how fragile financial systems and inadequate governance, influenced by income inequality, obstruct Africa\'s sustainable energy transition, advocates for cohesive policies to tackle inequality, implements institutional reforms, and promotes financial inclusion, while providing substantial, regime-dependent insights into energy consumption dynamics.

Keywords: Income inequality; energy consumption; financial development; governance; institutional quality; dynamic panel threshold analysis (search for similar items in EconPapers)
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DOI: 10.18267/j.polek.1534

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