Renewable energy and total factor productivity in OECD member countries

This paper studies the impact of renewable energy on the total factor productivity (TFP), considering the role of human capital, innovation and trade openness in Organization for Economic Co-operation and Development (OECD) countries. By applying Cross-Sectional Autoregressive Distributed Lags (CSeARDL) technique, we analyse panel time-series data. We find our variables are non-stationary and strongly correlated across sample countries. Our findings support the argument that the use of renewable energy in the production process spurs TFP in the long run through different macroeconomic channels. Fossil fuel-driven production process is found to be inconclusive in influencing TFP in the long run. Human capital and technological advancement appear to be driving factors in spurring TFP in OECD countries. Our findings are robust in the presence of the common correlation effect, as well as heterogeneous and homogeneity restrictions in the short-run and long-run parameters. We identify several resultant policy implications. (c) 2021 Elsevier Ltd. All rights reserved.

Automated summary

The study shows that renewable energy has a long-term positive impact on total factor productivity in OECD countries, while the influence of fossil fuel-driven production processes is inconclusive. Human capital and technological advancement play essential roles in boosting TFP growth.