The Effect of Government Size and Good Governance on Energy Consumption Intensity: A Case Study of OPEC Countries

Kiumars Shahbazi, Samad Hekmati Farid () and Hadi Rezaei ()
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Samad Hekmati Farid: Assistant Professor of Economics, Urmia University
Hadi Rezaei: MA Student of Economics, Urmia University

Quarterly Journal of Applied Theories of Economics, 2016, vol. 2, issue 4, 23-48

Abstract: Due to affluence of oil and its low price in OPEC countries, energy consumption in these countries is higher than world standards. So, Management of demand side of energy and offering solutions to decrease the energy consumption have been economists’ and policy makers’ concern in energy field. The government is one of the major institutions that affect energy consumption management. Hence, this paper investigates the nonlinear effect of government size and good governance on energy consumption intensity in OPEC countries during 2002-2011 using the panel smooth transition regression (PSTR) and the variables such as industrial value added and population are used as control variables. The results show that hypothesis of linear relationship between government size, good governance and energy consumption intensity is rejected and suggested model has two regimes with one threshold level. In the first regime, the government size, good governance and population have significant and negative effect and industrial value added has significant and positive effect on energy consumption intensity. In the second regime, after the threshold level, government size and industrial value added have significant and positive effect, and population and good governance have significant and negative effect on energy consumption intensity.

Keywords: Energy Consumption Intensity; Government Size; Good Governance; PSTR (search for similar items in EconPapers)
JEL-codes: Q40 Q43 Q48 (search for similar items in EconPapers)
Date: 2016
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