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How welfare variables influence energy consumption? -evidence from Ecuador and Mexico

Abstract:

Energy consumption (EC) can be seen as a two-edged sword. It can be not only essential for sustaining good standards of living but also in hindering environmental protection. Consequently, what is the causal relationship between welfare variables and energy consumption in different economies has become one of the focal issues for both policy makers and researchers. The aim of this study attempts to investigate the causal relationship between economic growth (EG), foreign direct investment (FDI), remittances (RMTs), human development index (HDI), and EC using annual data from 1981 to 2011 through multivariate Granger causality tests for Ecuador and Mexico. The empirical analysis indicates that for Ecuador, in the long run, there are unidirectional causalities flowing from FDI, HDI, and RMTs to EC. For Mexico, there is no evidence of any welfare variable flowing to EC but there are unidirectional causalities running from EC to RMTs, HDI to FDI, and FDI to GDP all in the long run. With this information, we suggest policy makers of these two countries, especially for Ecuador, to strongly advocate energy-saving concepts to the public and actively implement more infrastructure projects related to health and education, provide incentives for international advanced green technology transformation, and liberalize international remittances. © (2013) Trans Tech Publications, Switzerland.