Energy Economics 69 (2018) 185–195

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Energy Economics

journal homepage: www.elsevier.com/locate/eneeco

Does the level of energy intensity matter in the effect of energy

consumption on the growth of transition economies? Evidence from
dynamic panel threshold analysis
Celil Aydin a,⁎, Ömer Esen b
a
Department of Economics, Bandırma Onyedi Eylül University, 10200, Balıkesir, Turkey
b
Department of Economics, Muş Alparslan University, Muş 49250, Turkey

a r t i c l e i n f o a b s t r a c t

Article history: This study investigates whether the effect of energy consumption on economic growth differs by the level of en-
Received 12 August 2016 ergy intensity. We employ an advanced dynamic panel threshold regression model to test for the “threshold”
Received in revised form 10 November 2017 level of energy intensity that has an asymmetrical energy consumption effect on economic growth; we consider
Accepted 17 November 2017
12 Commonwealth of Independent States countries over the period 1991–2013. The estimated panel threshold
Available online 26 November 2017
regression model suggests 0.44% as the threshold level of energy intensity. Energy consumption above this
JEL classification:
level significantly retards economic growth, whereas energy consumption below the level is found to have a sta-
C24 tistically significant positive effect on economic growth. Thus, when the threshold level of energy intensity (one
Q43 of the important indicators of energy efficiency) is exceeded, energy consumption significantly hinders growth. If
O11 policy makers pay more attention to energy intensity while formulating new energy policies, substantial gains
can be achieved in low energy intensity environments.
Keywords: © 2017 Elsevier B.V. All rights reserved.
Dynamic panel threshold analysis
Energy consumption
Economic growth
Energy intensity

1. Introduction
The transition of a centrally planned economy into a market economy
requires a long and socially costly process involving comprehensive and
continuous development and change for the whole economic system.
The main component of a successful transformation is a set of corporate
and structural regulations. Because these corporate and structural regula-
tions would include sustainable economic and behavioral principles, the
transition process must be gradual. For a real-world example, the reason
why the Soviet system lost its power was the loss of its economic influ-
ence (Havrylyshyn, 2001). Thus, a resource allocation mechanism based
on centralist planning is inadequate for the efficient and effective use of
economic resources. Studies on the determinants of economic growth
during a transition process have emphasized that increasing the efficiency
of production factors can be more determining than pumping additional
investments into the economy (Havrylyshyn and Wolf, 1999).
When the Union of Soviet Socialist Republics (USSR) dissolved in the
early 1990s, the Commonwealth of Independent States (CIS) countries
transitioning from centralist planning into free market economies took
⁎ Corresponding author.
E-mail addresses: celil.aydin@atauni.edu.tr (C. Aydin), o.esen@alparslan.edu.tr
(Ö. Esen).
over the USSR's economic structure. These countries constituted just
one part of the interactive economy in terms of technology and produc-
tion management principles. The multidimensional economic relations
of previous periods were eliminated after the dissolution of the Soviet
system, with the result of economic regression for the transitioning
states. For several reasons such as obsolete technology and lack of cap-
ital, the transition economies that took up this production structure did
not have the production capacity to meet their internal demand during
the transition process. In addition, political failures and widespread
poverty increased the social and political tension in the post-Soviet
countries. Thus, the transition countries that had sufficient energy and
other natural resources used them, at least to some extent, to alleviate
the problems that arose during the transition process. The energy sector
acted as growth engine in this process. In addition, the energy sector has
an important place in public and export income. The countries' exports
consisted of mostly energy products, and as a result, there was large in-
stability in their currency income and energy prices. Furthermore, the
fluctuations observed in their energy prices adversely affected their eco-
nomic development. However, for sustainable growth, the production
structure of the transition countries must depend less on the export of
labor-intensive goods and unprocessed raw material (especially oil
and gas) to the developed countries and focus more on industries re-
quiring intensive capital and advanced technology. This emphasizes

https://doi.org/10.1016/j.eneco.2017.11.010
0140-9883/© 2017 Elsevier B.V. All rights reserved.
186 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
the importance of energy consumption depending on the increased pro-
duction and efficient use of energy.
As the efficient use of energy implies the finding of new energy re-
sources, the effective and efficient use of energy resources is no less im-
portant than the energy consumption for economic development. As
the literature review shows, energy intensity is an indicator of energy
efficiency. The energy intensity ratios of a country depend on certain
factors (e.g., the production structure of the economy, scale of indus-
tries, capacity utilization levels, consumption habits of societies, popula-
tion, climatic conditions, technological developments, energy policies,
and amount of energy resources). Energy intensity refers to the amount
of energy an economy uses per unit value added in a specific production
process, or the intensity of energy usage in the production process
(Gomulka, 1990; Fisher-Vanden et al., 2004; Liao et al., 2007). Hence,
energy intensity is the measure of energy use efficiency of an economy
in the production process. Low energy intensity means that the econo-
my is using its energy resources more efficiently and effectively in pro-
duction; that is, it indicates that the amount of energy consumed to
generate one unit of income is low (Kavak, 2005: 12). In this sense,
the use of less energy to satisfy the energy needed for growth contrib-
utes to an economy in several ways (e.g., less dependence on external
energy sources and increased resistance to external shocks). Under
such circumstances, the resources should be channeled to investments
generating high added value so as to create an environment allowing
for energy to be used as efficiently as possible. Productivity can be in-
creased through the consumption of less energy through improved en-
ergy efficiency. Besides promoting economic growth, this can help
reduce greenhouse gas emissions, which is supposed to be the main
cause of climate change. Thus, we can conclude that the transition
from energy resources providing lower efficiency and high pollution
to energy options offering more efficiency could boost the economy
rather than hinder economic growth (Belke et al., 2011). Otherwise,
the low contribution of each factor to production—and, thus to
growth—would mean low income levels, restricted new investment op-
portunities, and impeded long-term and steady economic growth.
From the literature review, most studies examining the relationship
between energy consumption and economic growth focus on models
and analysis techniques that use a linear hypothesis based on causal re-
lationship. Analyses and interpretations based on the assumption of lin-
ear relationship between energy consumption and economic growth
point to the symmetrical relationship between increases and decreases
in energy consumption and economic growth. These studies view the en-
ergy consumption level as indicator of development, assuming that a
country's production and welfare level are based on the amount of energy
it consumes. However, the development of a country should be measured
by its ability to create more economic value using less energy (i.e., deliver
the same production output with a lower amount of energy), rather than
energy consumption rates. Energy consumption is indeed important for
economic growth, but it must be balanced. The energy saved through ef-
ficient usage is more valuable than the energy produced. Increasing the
efficiency of energy is more economical than investments to obtain addi-
tional energy resources. Also, it could be more costly and time consuming
to produce the same amount of energy that can be obtained through sav-
ings. Moreover, saving energy is relatively quicker and cheaper; that is, it
is more efficient. Therefore, how energy is consumed is more important
than the amount of energy consumed. This asymmetry points to a non-
linear relationship. Empirical studies in the literature provide very little
information on whether this relationship is linear (i.e., whether energy
consumption has a threshold level) or not.
The relationship between energy consumption and economic growth
has been one of the most frequently discussed issues in the economics lit-
erature, especially after the oil crises in the 1970s. However, the issue has
not been addressed in terms of the economies transitioning from centrally
planned to free market economies. This study aims to empirically reveal
the effect of energy consumption on the economic growth of 12 CIS coun-
tries transitioning from centrally planned to free market economies
following the collapse of the socialist regime at the end of the 1980s. In
line with this purpose, we believe that this study contributes significantly
to the literature on the foundations of the transition economies' economic
growth by examining the issue in terms of where the states take active
roles. This study contributes to the literature in four different aspects:
(i) First, our sample consists of 12 economies transitioning from the social-
ist economic system to the market economic system. While these coun-
tries experience different market economies, they face identical
problems such as poverty, less developed infrastructure, strong and strict
command installation, and a public sector that is continuously becoming
bigger and clumsier. Apart from the extremely centralized, interventionist,
and clumsy structure of the socialist system, several reasons such as lack of
good infrastructure, obsolescence of technology, and lack of capital directly
affect their efficiency and economic growth. Therefore, our study of coun-
tries carrying out corporate and structural regulations to overcome poverty
is a good contribution to the literature. (ii) Second, while earlier studies ex-
amine the energy consumption–economic growth nexus, we analyze the
effect of energy consumption on growth by taking into account how ener-
gy resources are used in terms of efficiency. Energy intensity level is one of
the most important factors determining the relationship between energy
consumption and growth. (iii) Third, in contrast to previous studies, we
analyze the long-term relationship between variables by taking national
and international tendencies into consideration. (iv) Fourth, previous stud-
ies focus on the effects of energy consumption on economic growth as-
suming that the relationship is linear, meaning that the effect of energy
consumption on growth is the same (symmetrical) for both intense and
even periods. On the other hand, we assume that the relationship between
energy consumption and economic growth need not necessarily be linear.
Thus, the effects of energy consumption on growth are asymmetrical. In
other words, the effects depend on the energy intensity. This study offers
an alternative to the extant literature by employing an innovative non-
linear dynamic panel threshold regression analysis.
The purpose of this paper is to investigate whether level of energy
intensity plays an important role in the effect of energy consumption
on the growth of twelve CIS countries in the transition process. In the
study, the threshold regression model was used to find the threshold
level above which energy consumption adversely affects economic
growth. Moreover, the study aims to put the energy consumption-
growth debates, which are built most often on an incorrect theoretical
and empirical basis, on a solid ground. This paper is organized as fol-
lows. Section 1 discusses the effect of energy consumption on economic
growth within the framework of the efficient use of energy. Section 2
briefly reviews the theoretical and empirical literature focusing on the
relationship between energy consumption and economic growth.
Section 3 describes the model and econometric methodology used in
the study. Section 4 examines both the linear and non-linear effect of
energy consumption on economic growth in two steps. In the first
step, whether energy consumption has an effect on economic growth
is examined through an analysis of co-integration and causality under
structural breaks based on linear assumptions. In the second step, con-
sidering that a long-term and linear relationship exists between the var-
iables, it is questioned whether the effect of energy consumption on
economic growth changes according to energy intensity through the
use of non-linear threshold regression techniques. Section 5 provides
policy implications and conclusions.
2. Literature review
The importance of energy as an input for economic growth had been
ignored until the 1973–1974 and 1978–1979 oil crises. With these oil
shocks, the entire world realized that energy and energy-based inputs
play an important role in the production process. As a result, the num-
ber of studies examining the relationship between energy and econom-
ic growth gradually increased. Although many studies examine the
effect of energy consumption on economic growth, the debates are
still ongoing about whether energy consumption is the locomotive of
 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
economic growth or has little adverse or no effect on economic growth.
In the literature, many studies investigating the effect of energy con-
sumption on economic growth have arrived at different results. For ex-
ample, Yu and Choi (1985) for Philippines, Masih and Masih (1996) for
India and Pakistan, Soytas and Sari (2003) for Turkey, France, Germany,
and Japan, Shiu and Lam (2004) for China, Sari and Soytas (2007) for
Indonesia, Iran, Malaysia, Pakistan, Singapore, and Tunisia, Narayan
and Smyth (2008) for G7 countries, Lee and Chang (2008) for 16
Asian countries, Apergis and Payne (2009a) for six Central American
countries, Apergis and Payne (2009b) for 11 CIS countries, Menyah
and Wolde-Rufael (2010) for South Africa, Tsani (2010) for Greece, Al-
Mulali and Sab (2012) for 30 Sub-Saharan African countries, Iyke
(2015) for Nigeria, and Esen and Bayrak (2017) for 75 net energy-
importing countries have found that energy consumption promotes
economic growth, while other studies, such as Yu and Hwang (1984)
for the US, Yu and Choi (1985) for the US, the UK, and Poland, Masih
and Masih (1996) for Malaysia, Singapore, and the Philippines, Cheng
(1999) for India, Oh and Lee (2004) for Korea, Al-Iriani (2006) for 6
Gulf Cooperation Council countries, Mehrara (2007) for 11 oil exporting
countries, Menegaki (2011) for 27 European countries, and Hamit-
Haggar (2012) for Canada, support the view that energy consumption
has little or no effect on economic growth.
Most studies dealing with the relationship between energy consump-
tion and economic growth depend on the assumption that a linear and
causal relationship exists between the two variables. Following the selec-
tion of econometric models, analyses are conducted in accordance with
this assumption. If models are selected and analyses are carried out by as-
suming that there is a linear relationship between the two variables, it is
directly accepted as a presupposition that the variables display similar be-
haviours regardless of the production structure of the country. On the
other hand, energy consumption can have a non-linear effect on economic
growth depending on the way the energy is used. Although energy con-
sumption is regarded as a development indicator in the growth and devel-
opment literature, the focus of recent debates has mostly been on the
need to consider the ability to create more economic value by using less
energy as an indicator of development, instead of the energy consumption
levels. In line with such debates there has been an increase in the number
of studies focusing on the possibility that a non-linear relationship exists
between economic growth and energy consumption and on the potential
asymmetric effect energy consumption has on economic growth.
The empirical research in the literature dealing with energy and
growth offers very little information about the existence or non-
existence of a non-linear relationship between energy consumption and
economic growth (i.e., about the existence or non-existence of a threshold
level for energy consumption). Lee and Chang's (2007) research is among
the most important studies conducted based on the assumption that a
non-linear relationship exists. Using one-sector and two-sector growth
models, they investigated the linear and non-linear effects of energy con-
sumption on economic growth in Taiwan for the period from 1955 to
2003. Their findings indicate that a non-linear relationship exists and is
characterized by a “U-shape” pattern between the two variables for
Taiwan. According to this pattern, first a decrease and then an increase
occur. In this pattern, although the energy consumption under the esti-
mated optimal values positively affects economic growth at a significant
level, the relationship is insignificant over the threshold (or even a nega-
tive relationship exists). Conducting a similar study, Huang et al. (2008)
separated the data covering the 1971–2002 period into two periods for
82 countries and investigated the relationship between energy consump-
tion and economic growth in these periods. Their analysis results indicate
a non-linear relationship between the two variables.
The literature on the role of energy intensity in this relationship pro-
vides little evidence. Hu and Wang (2006) examined the energy efficiency
of 29 regions of China and determined, by finding a U-shaped relationship
between energy efficiency and per capita income, that energy efficiency
would rise along with economic growth. Honma and Hu (2008), who
conducted a similar study for the regions of Japan, obtained findings
187
supporting these results. Aydin and Esen (2016) examined whether the
level of energy intensity plays an important role in the relationship be-
tween energy consumption and economic growth in the case of Turkey.
They observed that energy consumption significantly promotes economic
growth when energy intensity is below 0.191, the threshold level, where-
as it has a negative effect on economic growth when energy intensity is
above this threshold. A similar study conducted by Aydin and Esen
(2017) emphasizes that the level of energy intensity has a particular
threshold value, that energy consumption is an important hurdle to eco-
nomic growth when such threshold is exceeded, and that the level of in-
tensity has to be considered for sustainable growth performance.
3. Model, data set, and econometric method
This study investigates whether the effect of energy consumption on
economic growth is dependent upon energy intensity level based on a
sample of 12 CIS countries (Azerbaijan, Armenia, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan,
Uzbekistan, and Ukraine) in the transition process covering the period
from 1991 to 2013. This relationship was examined based on the neoclas-
sical production function used by Ghali and El-Sakka (2004), Lee and
Chang (2007), and Huang et al. (2008). Eq. (1) shows the production
function, which includes energy consumption as a factor of production
like capital stock and labor:
_ it þ βxit þ ε it
Y_ it ¼ α 0 initiali þ α 1 EC ð1Þ
where Y_ indicates the real GDP growth at time t in country i; initial indi-
_ is the energy consumption rate; x rep-
cates the initial level of income; EC
resents other macroeconomic variables that might have an impact on
economic growth; and ε denotes the white noise error term.
The literature review shows that the real GDP is taken as a basis in the
international comparisons as it gives important information about the
growth performances of economies; however, in comparing the living
standards of different countries or examining the changes in the welfare
level of a country over time, the real GDP per capita is preferred as it
takes into account the number of people living in a country. In this sense,
we used the annual growth rate of real GDP per capita (dgdp) as an indica-
tor of living standards. We also used the growth rate of energy consump-
tion per capita (dec) as the independent variable of the model. The energy
consumption growth rate was calculated based on the logarithmic differ-
ence of energy consumption per capita (tons of oil equivalent). To control
the effects of other macroeconomic variables related to economic growth,
we used the following control variables based on the studies of Khan and
Senhadji (2001), Drukker et al. (2005), Huang et al. (2008), and Kremer
et al. (2013): percentage of GDP dedicated to investment (igdp), growth
of labor force participation rate (dlab), inflation (π),1 initial income level
(dgdpit-1), openness (open), terms of trade (dtot), standard deviation of
openness (sdopen), and standard deviation of terms of trade (sdtot). We
also used energy intensity (tpes/Y) as the threshold variable. In addition,
considering that the fluctuations in energy prices could affect economic
growth over energy demand/consumption, the uncertainty variable of en-
ergy prices (uncertainty) was added to the model (Bernanke, 1983;
Papapetrou, 2001; Belke and Goecke (2005).2 We obtained the data
1
Annual change in Consumer Price Index representing all prices and that which is con-
sidered to affect energy consumption (energy price, peripheral taxes, exchange rate, the
price of consumption goods, etc.) was added to the model (Belke and Dreger, 2015).
2
To calculate the uncertainty variable, we first apply a stationarity test on the annual
change observed in the monthly raw oil prices, and find stationarity at I(0). Then, in order
to select the optimal average equations, we form various ARMA (p,q) models. ARMA
(1,12) was determined to be the most optimal average equation in view of the AIC values
and cost of the Box-Jenkins methodology. In order to test for an ARCH effect in the average
equation, we used the ARCH-LM test, and found that the ARCH effect did exist. Then, on
testing the ARCH–GARCH models, the GARCH (1,1) model was selected as the most opti-
mal model. When the ARCH-LM was applied again, we found that the ARCH effect did not
exist. Finally, we calculated the annual average of the monthly variance values, including
those for the period 1991–2013.
188 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
about real GDP per capita and percentage of GDP dedicated to investment
from the Penn World Table version 9.0. The data about the inflation rates
and population were obtained from the United Nations Statistics (UN
Data), the data about crude oil price were obtained from U.S. Energy Infor-
mation Administration (EIA), and the data about the other variables were
acquired from the database of the World Development Indicators (WDI).3
We included the lagged value of the growth rate of GDP per capita in
the model as the explanatory variable based on the assumption that pro-
duction level and structure of an economy are not entirely independent
of the previous periods; thus, production levels in the previous period
are also reflected in the subsequent periods (Ramirez-Rondán, 2013).
The fixed effects and random effects models used for dynamic panel
data analysis considered the lagged effects of the dependent variable as
the explanatory variable. Thus, a relationship emerged between the
lagged values of the dependent variable and the error terms, and this re-
lationship led to inconsistencies between the estimations made by fixed
and random effects models and the estimators (Greene, 2000). In such
cases, the dynamic panel data method can eliminate the relationship
between the lagged values of the dependent variable and the error
terms and thus increase the reliability of the estimations and consisten-
cy of the estimators.
In this study, we applied the dynamic panel threshold model devel-
oped by Kremer et al. (2013) that extends Hansen's (1999) static model
for endogenous regressors. We chose the initial level of income as the
endogenous regressor (dgdpit-1). Our panel threshold model was built
on Caner and Hansen's (2004) cross-sectional threshold model, where
Generalized Method of Moments (GMM) type estimators are used in
order to allow for endogeneity. Eq. (2) shows the model.
yit ¼ ui þ β01 zit Iðqit ≤ γ Þ þ β02 zit Iðqit NγÞ þ εit ;
where i represents the units within the scope of the cross section (i = 1,
…,n), t indicates the time series dimension for each unit (t = 1, …, T), yit
is the dependent variable, μi is the country-specific fixed effect, εit ≈
(0,σ2) is the independently and identically distributed error term, I(.)
is the indicator function specifying the regime, qit is the threshold vari-
able, and ϒ is the threshold value. In addition, zit indicates an m-
dimensional vector of explanatory regressors that may include the
lagged values of the dependent variable and other endogenous vari-
ables. The vector of explanatory variables is partitioned into a subset
z1it of exogenous variables uncorrelated with εit and a subset of endog-
enous variables z2it correlated with εit (Kremer et al., 2013).
In the first step of the model estimation in Eq. (2), the individual ef-
fects (μi) have to be eliminated via a fixed-effects transformation. There-
fore, we apply the forward orthogonal deviation method suggested by
Arellano and Bover (1995). Eq. (3) gives the method:
rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi  This study examines the role of energy intensity in the relationship be-
T−t 1   tween the economic growth and energy consumption of 12 CIS countries
εit ¼ εit − εiðtþ1Þ þ ⋯ þ εiT
T−t þ 1 T−t
The most distinguishing feature of this method is that it can avoid
the serial correlation of the transformed error terms. This feature allows
for applying the estimation procedure derived for a cross-sectional
model to dynamic panel data models.
The next step of the estimation procedure involves the use of two-
stage least squares (2SLS) to estimate the energy intensity threshold
level. To this end, we first estimate a reduced-form regression for the
endogenous variables (z2it) as a function of the instruments (Xit). The
endogenous variables (z2it) in the structural equation are then replaced
by the predicted values (^z2it). Finally, we estimate the model in Eq. (2)
via least squares for a fixed threshold (ϒ). This step is repeated for the
subsets of the threshold variable q. From the threshold values, we select
3 4
For the basic information and descriptive statistics of the variables, see Tables A.1 and
A.2, respectively, in Appendix A. In addition, the graphics of the variables are given in
Fig. B.1, Appendix B.
the threshold value with the smallest sum of squared residuals (S(γ)) as
the most appropriate threshold value (γ ^ ). Eq. (4) shows this procedure
(Hansen, 2000: 578):
^ ¼ argmin Sn ðγÞ
γ ð4Þ
Following the earlier studies by Hansen (1999), Caner and Hansen
(2004), and Kremer et al. (2013), we estimate the critical values and de-
termine the 95% confidence interval of the energy intensity threshold
value. We use Eq. (5) to estimate these critical values:
Г ¼ fγ : LRðγÞ ≤ C ðα Þg ð5Þ
In Eq. (5), C(α) is the 95% percentile of the asymptotic distribution of
the likelihood ratio statistic LR(γ). The underlying likelihood ratio is ad-
justed to account for the number of time periods used for each cross sec-
tion. In the dynamic panel model, once the appropriate threshold value
(γ^ ) is determined, the slope coefficients are estimated by the general-
ized method of moments (GMM) for the previously determined instru-
ments and the previously estimated threshold. Eq. (6) gives the
dynamic panel threshold model formed with GMM to examine the ef-
fect of the energy intensity threshold value on the relationship between
energy consumption and economic growth.
   
dgdpit ¼ ui þ β1 decit I ðtpes=Y Þit ≤ γ þ δ1 I ðtpes=Y Þit ≤ γ
þ β2 decit I ðtpes=Y Þit Nγ þ ∅zit þ εit ; ð6Þ
where decit represents the growth rate of energy consumption per
capita for both regime types, zit represents the vector of control vari-
ables, tpes/Y denotes the threshold variable, β1 and β2 indicate the
ð2Þ regime-dependent slope coefficients, and δ1 indicates the fixed regime
coefficient. Following Bick (2010) and Kremer et al. (2013), we use
the initial income level dgdpit − 1(z2it) as the endogenous variable.
The number of instrumental variables in the estimations using the dy-
namic panel analysis method is important because it affects the results
(Roodman, 2009). However, the number of instrumental variables in a fi-
nite sampling model displays the interchangeable relationship between
the efficiency of the estimators and the deviation. While the use of all
the possible lagged dependent variables as instrumental variables in-
creases the efficiency of the estimators, using just one lagged dependent
variable as instrumental variable makes the estimated coefficients neu-
tral. (Kremer et al., 2013). Taking the efficiency into account and based
on Arellano and Bover's (1995) study, all the lagged values of the depen-
dent variable in the model are used as instrumental variables.4
4. Findings
ð3Þ
in two steps. In the first step, we examine whether energy consumption
affected economic growth using analyses based on linear assumptions.
In the second step, we consider the long-term relationship between the
variables and examine whether the effect of energy consumption on eco-
nomic growth changes according to the energy intensity.
While analyzing the long-term relationship between economic
growth and energy consumption, we need to distinguish between na-
tional and international tendencies. Therefore, the variables should be
categorized as the countries' common or idiosyncratic variables.
While national developments have a role in the development of idio-
syncratic variables, the international trends effective in the development
of variables also drive the common variables. Moreover, the idiosyncratic
variables may differ from country to country. Most of the co-integration
tests examining the long-term relationship between variables consider
In addition, we use only one lagged value of the dependent variable as instrumental
variable in the study. The number of selected instrumental variables has no significant ef-
fect on the results.
 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
only the common variables and disregard the country's idiosyncratic fea-
tures. Because the results of such tests may change when the idiosyncratic
features are taken into account, this study prefers the tests that consid-
ered the countries' common variables as well as idiosyncratic features
(Dobnik, 2011; Belke et al., 2014a; Belke et al., 2014b).
First, we examine the dependency between cross sections (coun-
tries) and whether the dependency between the panel cross sections af-
fects the estimation results to a great extent (Breusch and Pagan, 1980;
Pesaran, 2004). Thus, the cross-sectional dependency in the series and
co-integration equation needs to be tested. In addition, this factor
should be kept in mind when selecting the unit root and co-
integration tests. Otherwise, the analysis would be incorrect. Therefore,
we first analyze the existence of cross-sectional dependency using the
Adjusted Lagrange Multiplier (LMadj) test developed by Breusch and
Pagan (1980) and corrected by Pesaran et al. (2008).
From the cross-sectional dependency test results, the null hypothe-
sis of “no cross-sectional dependency” formulated with regard to the
GDP per capita and energy consumption per capita series is strongly
rejected. Thus, we conclude that the series and the model involved
cross-sectional dependency.5 From this result, a shock affecting one
country does affect other countries too. It is also important to choose
the methods used to test for cross-sectional dependency. Therefore, in
the following parts of the study, we use the panel unit root tests as
well as panel co-integration analysis methods, both of which take
cross-sectional dependency into consideration.
The second part of the analysis examines whether the panel data
remained stationary over time. The first problem with panel unit root
analysis related to whether the panel cross sections are independent
from each other. We divide the panel unit root tests into two categories,
the first-generation and second-generation tests. The first-generation
tests are further divided into two categories depending on whether
the panel cross sections are homogenous or heterogeneous. While
Levin et al. (2002), Breitung (2000), and Hadri (2000) depended on
the homogeneity hypothesis, Im et al. (2003), Maddala and Wu
(1999), and Choi (2001) depended on the heterogeneity hypothesis.
The second-generation unit root tests are based on the assumption
that the panel cross sections are not independent, and that a shock af-
fecting one cross-sectional units also affects the other units in various
ways. Among the main second-generation unit root tests were Multi-
variate Augmented Dickey Fuller (MADF) developed by Taylor and
Sarno (1998), Seemingly Unrelated Regression Augmented Dickey Full-
er (SURADF) developed by Breuer et al. (2002), and Cross-sectional
Augmented Dickey Fuller (CADF) developed by Pesaran (2006).
However, as these tests may give deviant, incorrect results, there is a
unit root in the panel when structural breaks occur in the series (Lee
and Strazicich, 2004; Carrion-i-Silvestre et al. 2005). In order to elimi-
nate the shortcomings of these tests, Bai and Carrion-i-Silvestre
(2009) developed a method to test the stationarity of the series in
cases of cross-section dependency and multi structural breaks. This
test can evaluate the stationarity of the series of the panel in cases of
structural breaks in the averages and trends of the series. Thus, the sta-
tionarity of the series was tested using Bai and Carrion-i-Silvestre's
(2009) second-generation unit root test that regards both the cross-
section dependency and the structural breaks.
Bai and Carrion-i-Silvestre (2009) claimed that Z* and P* statistics
can be used when the sample number is small, and that a simplified
cluster is appropriate for level and trend break models (Liddle and
Messinis, 2015). Hence, we focus on these two (simplified) statistics
in the test results. The results showed that the “series includes unit
root” null hypothesis cannot be rejected in terms of GDP per capita
and energy consumption per capita levels, but can be rejected in its
first difference at the 1% significance level.6
5
The cross-sectional dependency test results are shown in Table A.3, Appendix A.
6 10
Bai and Carrion-i-Silvestre (2009). The panel unit root test results with structural
breaks and cross-sectional dependence are given in Tables A.4 and A.5, Appendix A.
189
Once the GDP per capita and energy consumption per capita series
are found to be stationary at their first difference level, it is important
to test for the long-term relationship between the two variables. For
this purpose, we use the LM-based test developed by Westerlund and
Edgerton (2008). This test checks for the co-integration relationship be-
tween non-stationary series in cases of cross-sectional dependency and
for more than one structural break in the co-integration relationship.
The Zφ(N) and Zτ(N) test statistics in the panel co-integration test
results show a co-integration relationship between GDP per capita
and energy consumption per capita in cases of cross-sectional depen-
dency and structural breaks.7 Therefore, we conclude that the series
move together in the long run. The structural break dates found in the
co-integration equations of the panel countries are given in Table A.7,
Appendix A. By applying the approach of Westerlund and Edgerton
(2008), we found one structural break in both specifications for each
country with mean and regime shifts,8 which can be associated with
huge global shocks.
As a next step, the long-term relationship between GDP per capita
and energy consumption per capita was estimated by means of the
Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary
Least Squares (DOLS) methods, taking each country's break dates ob-
tained as a result of the co-integration tests. The findings are shown in
Table A.8 in the Appendix A. The first and second columns in Table A.8
show the estimation results of FMOLS and DOLS, respectively, under
conditions where country-specific structural breaks are disregarded.
The last two columns, on the other hand, show the estimation results
under conditions where country-specific structural breaks are taken
into consideration.
As the long-run estimation results show, when country-specific
structural breaks are not taken into account, the energy consumption
per capita effect on GDP is statistically significant and negative under
both methods. In contrast, when the country-specific structural breaks
are taken into account, the effect decreases, but the direction does not
change. The possible long-run negative effect of energy consumption
on economic growth can be attributed to the excessive energy con-
sumption of inefficient sectors or inefficient energy supply in the
economies.
In the next stage, we analyze the causality between the GDP per
capita and energy consumption per capita. In this context, we estimated
the dynamic panel error-correction model by using the pooled mean
group (PMG) method proposed by Pesaran et al. (1999). The Granger
causality between the GDP per capita and energy consumption per
capita was controlled for with the Wald chi-squared test.9
As the dynamic panel causality test results show,10 as a whole, a bi-
directional causal relationship exists between ΔGdp per capita and ΔEC
per capita in the long-term, short-term, and strong causality conditions.
Thus, ΔGdp per capita is a Granger causality for ΔEC per capita, and ΔEC
per capita is a Granger causality for ΔGdp per capita. Furthermore, the
error correction terms (ECT) of the bidirectional causal relationship
are predicted to be significant at the 1% level with negative coefficients,
indicating that the relationship will move to equilibrium in the long run
after an external shock.
Thus far, we analyzed the effect of energy consumption on economic
growth. The analyses based on the linearity hypothesis show that the
absolute effect of energy consumption on growth is the same (symmet-
rical) in both the intense and even periods. However, we need to note
that when the effect of energy consumption on growth is asymmetrical,
meaning that the energy intensity is high, the effect of energy
7
The panel co-integration test results with structural breaks and cross-sectional depen-
dence are shown in Table A.6, Appendix A.
8
The countries' structural break dates are added to the dynamic panel threshold model
as (dummyit).
9
This study uses the Stata routine “xtpmg” proposed by Blackburne and Frank (2007)
to estimate the dynamic panel error-correction model using the PMG method.
The dynamic panel causality test results for the CIS countries are given in Table A.9,
Appendix A.
190 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195

consumption on growth will not be the same during the intense and
even periods. Therefore, we analyze the role of energy intensity in the
relationship between energy consumption and economic growth
using a dynamic panel threshold model that is not based on the linearity
hypothesis.
The role of energy intensity on the non-linear relationship between
economic growth and energy consumption was examined for the peri-
od 1991–2013 for 12 CIS countries. The obtained findings are shown in
Table 1. The upper part of Table 1 shows the estimated energy intensity
threshold level and the corresponding 95% confidence interval. The
middle part of the table shows the effect of energy consumption per
capita on economic growth for both regime types. β ^ denotes the mar-
1
ginal effect of energy consumption per capita on economic growth in
^ indicates the marginal effect
the low energy intensity regime, while β 2
of energy consumption per capita on economic growth in the high ener-
gy intensity regime. In a low energy intensity regime, the energy inten-
sity level is below the estimated threshold value, while in a high energy
intensity regime, the energy intensity level is above the estimated
threshold value.
As shown in Table 1, the estimated threshold value for energy inten-
sity is 0.44 (via two-stage least squares). Fig. 1 shows the sum of the Fig. 1. The sum of the squared errors of the threshold values.
threshold value squared errors for the model. In the model, the lower
limit of the threshold value at the 95% confidence level is 0.31, while industrialization, if the economic structure turns to more low energy in-
the upper limit is 1.58. These findings show that, in general, energy in- tensity industries and to technological developments that favor the effi-
tensity increases in the initial stages of economic development, but cient use of energy, it may decrease the energy intensity (Leach et al.,
shows a declining trend in the developed economies from the increas- 1986).
ing share of the services (tertiary) sector in economic growth during The results show that the regime-dependent coefficients are statisti-
the development process. In the underdeveloped or developing econo- ^ = 0.553 and β ^ = −0.331), meaning that energy
cally significant (β 1 2
mies, an increase in energy intensity is an expected consequence of in-
consumption per capita has a positive marginal effect on economic
dustrialization. In countries that have achieved a certain level of
growth in the regime with low energy intensity, but a negative marginal
effect in the regime with high energy intensity. In other words, the rate
Table 1 of energy consumption per capita below the threshold level has a posi-
Economic growth and energy consumption. tive effect on economic growth. If the rate is above the threshold value,
Estimated threshold value (tpes/Y) it would affect economic growth negatively. If we examine the regime-
^
γ 0.44*** dependent coefficients, we would find the effect of energy consumption
95% confidence interval [0.31–1.58] per capita on economic growth higher in the regime with low energy
Effect of energy consumption per capita (dec)
^
intensity.
β 0.553***
1
(0.191) Table 1 shows the GDP per capita first-degree lagged value coeffi-
^
β 2
−0.331*** cient in the model statistically significant. On the other hand, the control
(0.100) variable coefficients generally comply with the a priori expectations.
Effect of control variables First, the GDP percentage dedicated to investment and growth of labor
initialit −16.634*** force participation rate has a positive effect on GDP per capita. A quick
(3.732) increase in investment and growth of labor force participation can
igdpit 0.125**
lead to an increase in GDP. Second, inflation and the terms of trade
(0.053)
dlabit 0.389**
have a negative effect on GDP per capita. A decrease in inflation and for-
(0.171) eign trade rates can increase the GDP per capita. In addition, a significant
totit −0.101** relationship clearly exists between the dummy variable and GDP per
(0.051) capita. Because fluctuations in energy prices affect the economic growth
sdtotit −27.425***
over energy demand/consumption, we again estimate the non-linear
(9.078)
openit 1.345 relationship between economic growth and energy consumption
(3.016) under uncertain conditions using the dynamic panel threshold model.
sdopenit −9.701* The results are given in Table 2.
(5.497) As Table 2 shows, the estimated threshold value for energy intensity
πit −0.003***
(0.0007)
is 0.44 under uncertain conditions. The model's lower limit for the
dummyit 8.404*** threshold value at the 95% confidence level is 0.31, while the upper
(2.059) limit is 1.55. Thus, taking or not taking uncertainty into consideration
^
δ1 5.688* does not affect the threshold value for energy intensity. In other
(3.221)
words, the fluctuations observed in energy prices do not affect the ener-
Number of observations gy intensity threshold level.
^
tpes=Y ≤ γ 53 From the results, the regime-dependent coefficients are statistically
tpes=YNγ^ 223
significant (β^ = 0.494 and β ^ = −0.336) under uncertain conditions.
Number of countries 12 1 2
Thus, when uncertainty is not taken into consideration, the marginal ef-
Notes: The table shows the results for the dynamic panel threshold model. All available
fect of energy consumption per capita on economic growth is positive in
lags of the dependent variable are used as instruments in the analysis. Standard errors
are given in parentheses. *, **, *** indicate significance at 10%, 5% and 1% levels, a regime with low energy intensity, whereas it is negative in a regime
respectively. with high energy intensity. When the regime coefficients are analyzed
 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
Table 2
Economic growth and energy consumption including energy prices among the explanato-
ry variables.
Estimated threshold value (tpes/Y)
^
γ 0.44***
95% confidence interval [0.31–1.55]
Effect of energy consumption per capita (dec)
^ 0.491**
β1
(0.202)
^
β −0.336***
2
(0.101)
The results pertaining to the used control variables and uncertainty variables are not
shown in the table for the sake of completeness.
in terms of growth, energy consumption above the threshold has a
stronger effect on economic growth in the model that takes uncertainty
into consideration, whereas below the threshold, it has a stronger effect
in the model that does not take uncertainty into consideration.
5. Conclusion and discussion
Following the independence of the Soviet bloc member states, a new
process began. As regards their economic organization, the states turned
from a completely statist and centralist structure to the market economy.
The process of states in the region moving into the market economy has
been closely followed and discussed continuously throughout the
world. Economies that extend over a vast geography with their economic
underground and aboveground resources, labor potential, large produc-
tion, and market potential and raise issues about their future are of con-
cern to all countries and international economic/political organizations.
In order to maintain this process without any loss or delay, these coun-
tries must use their resources effectively and efficiently.
Even though the energy usage of developed economies falls behind
international standards to a great extent, it moves ahead along with in-
dustrialization efforts, and the economies' income levels increase.
Therefore, it is important to meet the energy required for economic
growth with less consumption of energy not only to comply with the
global climate change policies but also to gain other benefits, such as de-
crease in the country's external payment deficit and air pollution-based
diseases, increase in employment, and reduction in household expendi-
tures. Energy efficiency means turning every unit of used energy into
more services and products. In such an environment, it is important to
direct the resources toward high value-added investments and create
appropriate conditions for the use of resources as efficiently as possible.
Otherwise, the low contribution of each resource relative to production
(growth) will result in income level stagnation (at low levels) and sub-
sequently lead to a fall in new investment opportunities, continuously
hindering economic growth in the long run.
Previous studies analyzing the relationship between energy con-
sumption and economic growth mainly use linear models and achieve
inconsistent results. However, this study examined the role of energy
intensity in the relationship between energy consumption and the eco-
nomic growth of transition economies by using a recently developed
panel threshold regression model. We examined 12 CIS countries that
transitioned from a centrally planned economy to a free market econo-
my following the collapse of the Soviet Union.
This study examined the relationship between energy consumption
and economic growth in two steps. The first step used a linearity hypoth-
esis and analyzed whether energy consumption affected economic
growth. As regards panel data analysis, the study examined the existence
of dependency among panel cross sections. Observing cross-sectional de-
pendency, we researched the stability of serials with the help of a second-
generation unit root test from Bai and Carrion-i-Silvestre (2009) that
takes cross-sectional dependency and structural breaks into consider-
ation. In order to examine the co-integration relationship between
the variables, we used Westerlund and Edgerton's (2008) LM-based
test, which takes more than one cross-sectional dependency into
191
consideration. For the estimation of long-term coefficients, we used the
DOLS and FMOLS estimators. From the findings, energy consumption
has a long-term, negative, and statistically significant effect on economic
growth. Studies have observed that when structural breaks are consid-
ered, the effects decreased for both methods, but the direction did not
change. These findings support the hypothesis that the consumption of
more energy increases economic growth. Thus, it is more important to
focus on increasing the efficiency of energy rather than the consumption
of energy. Using the model used to find the validity of a long-term rela-
tionship, we carried out the Granger causality test of the causal relation-
ship between the variables, to find mutual causal relationships between
the variables in three cases (i.e., short-run, long-run, and strong causality).
In the second step, we found a long-term relationship between the
variables. In addition, we examined whether the effect of energy con-
sumption on growth changes according to the level of energy intensity.
This study employed an advanced dynamic panel threshold regression
model to investigate whether there existed a “threshold” energy intensity
level in the asymmetrical effect of energy consumption on economic
growth.
This study offers a better empirical model than the standard linear re-
gression analysis models. The findings strongly suggest that the intensity
level of energy is an important factor in explaining the effect of energy
consumption on economic growth. This outcome implies that energy con-
sumption has a non-linear effect on economic growth. The estimated
threshold regression model suggests 0.44% as the threshold energy inten-
sity value, below which energy consumption significantly promotes the
growth of transition economies. However, energy consumption is detri-
mental to economic growth when it is above the threshold level
(i.e., 0.44%). Because fluctuations in energy prices will affect economic
growth with energy demand/consumption, we once again estimated
the non-linear relationship between economic growth and energy con-
sumption under uncertain conditions using the dynamic panel threshold
model. The findings showed that the threshold value of energy intensity
does not change if uncertainty is taken into consideration or not. An anal-
ysis of the regime coefficients in terms of growth showed that energy con-
sumption above the threshold level has a stronger effect on economic
growth in the model that took uncertainty into consideration. On the
other hand, below the threshold, energy consumption has a stronger ef-
fect in the other model. In other words, fluctuations in energy prices
have a weak effect on the energy intensity threshold level.
In conclusion, the policy implication of this study is that it is desir-
able to keep energy intensity below the threshold level in transition
economies because it may help maintain sustainable growth. Using
the dynamic panel threshold technique, we show that the effect of ener-
gy consumption on economic growth is negative when the energy in-
tensity level is high, but can be positive when the intensity level is
low. Thus, a substantial increase in growth can be achieved by focusing
on energy efficiency. The optimal level of energy intensity provides pol-
icy makers with much flexibility when they seek to implement a cost-
effective strategy for economies without increasing their energy con-
sumption or worrying too much about energy security.
Whether the country is a net energy exporter with rich resources or
a net energy importer with poor resources, it must use energy in an ef-
fective and efficient manner both in terms of production and consump-
tion, and take necessary steps to have a competitive sustainable
economic structure. By decreasing their energy intensity in production
and daily life, increasing the efficiency in all energy chains, decreasing
losses and fugitives, applying productive technologies in production, re-
habilitating buildings, and educating all relevant parties, countries can
ensure their economic growth and make significant contributions to
the global climate problems. Therefore, although most of the CIS coun-
tries in transition do not have problems in terms of reserves, they
must be cautious when applying strategies and policies to increase the
efficient use of their energy resources and energy efficiency in order to
quicken their economic development, attain their growth aims, and im-
prove their living standards.
192 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195

Appendix A

Table A.1
Basic information about the variables.

Abbreviation Explanation

dgdp Annual growth rate of real GDP per capita ($)

dec Logarithmic difference of energy consumption per capita (kg of oil equivalent)
tpes/Y Total primary energy consumption as a percentage of GDP measured at purchasing power parity (tons of oil equivalent/$1000)
π Annual percent changes in the Consumer Price Index (CPI)
igdp Percentage of GDP dedicated to investment ($)
dlab Employment/population growth rate
dgdpit-1 GDP per capita of the previous term
open Logarithm of export and import as percentage of GDP
sdopen Standard deviation of openness
dtot Import/export growth rate
sdtot Standard deviation of terms of trade
uncertainty Oil price uncertainty

Table A.2
Descriptive statistics.

tpes/Y dgdp dec π igdp dlab open dtot

Mean 1.481 0.565 −3.665 268.087 47.770 −0.155 4.518 1.304

Std. dev. 1.183 14.542 10.391 1100.743 24.459 2.750 0.373 16.899
Min 0.187 −77.653 −54.125 −18.930 10.102 −23.804 3.329 −43.016
Max 5.962 37.151 44.665 1544.380 117.701 14.736 5.666 108.906

Table A.3
Cross section dependence.

Test Gdp per capita EC per capita

Statistics Statistics

CDBP 100.199*** 108.006***

CDLM 2.977*** 3.656***
CD −2.050** −2.847***
LMadj 9.242*** 9.580***

*, **, *** indicate significance at 10%, 5% and 1% levels, respectively.

Table A.4
Bai and Carrion-i-Silvestre (2009) Panel unit root test statistics with structural breaks (in level and trend) and cross-section dependence.

Test Level Difference

GDP per capita

Z −0.677 −2.526
P 45.606 54.655
Pm 3.119 −2.526
Z⁎ −0.737 −2.526***
P⁎ 32.674 54.655***
P∗m 1.252 −2.526***

EC per capita
Z −1.038 −2.105
P 37.573 65.275
Pm 1.959 5.957
Z⁎ −1.355 −2.105**
P⁎ 34.456 65.275***
P∗m 2.953 5.957***

**, and *** indicate significance at the 5% and 1% levels, respectively. P ∗ and Pm⁎ denote the corresponding P and Pm statistics that are computed by means of the p-values of the
simplified MSB statistics, respectively. The 1%, and 5% critical values for the standard normal distributed Z and Pm statistics are 2.326 and 1.645, while the critical values for
the chi-squared distributed P statistic are 42.980 and 36.415, respectively. The number of common factors is estimated using the panel Bayesian information criterion proposed
by Bai and Ng (2002).
 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195 193

Table A.5
Bai and Carrion-i-Silvestre (2009) Panel unit root test statistics (in level and trend).

Variables* Z⁎ P⁎ P∗m

dlab −2.139** 47.025*** 3.323***

dtot −2.629*** 64.773*** 5.885***
open −0.964 25.147 0.165
igdp −1.575 53.704*** 4.287***
inflation −2.987*** 83.438*** 8.579***

* indicates in differences. **, and *** indicate significance at the 5% and 1% levels, respectively. The 1%, and 5% critical values for the standard normal distributed Z and Pm statistics are 2.326
and 1.645, while the critical values for the chi-squared distributed P statistic are 42.980 and 36.415, respectively.

Table A.6
Panel cointegration test results with structural breaks and cross-section dependence.

Model Zφ(N) Zτ(N)

No break −5.130*** −2.666***

Mean shift −2.734*** −2.466***
Regime shift −2.558*** −1.552*

Notes: The LM-based test statistics Zφ(N) and Zτ(N) are normal distributed. The number of common factors is determined by means of the information criterion proposed by Bai and Ng
(2004) and the maximum number is set to 5. *, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

Table A.7
Estimates of breaks.

Country Mean shift Regime shift

Armenia 2006 2006

Azerbaijan 2006 2006
Belarus 2006 2006
Georgia 2006 2006
Kazakhstan 2000 2000
Kyrgyz Republic 2000 2000
Moldova 2000 2000
Russian Federation 1996 1996
Tajikistan 2005 1996
Turkmenistan 2005 2005
Ukraine 2005 2005
Uzbekistan 2005 2005

Notes: The break dates are selected by means of the test approach suggested in Westerlund and Edgerton (2008) which follows the strategy of Bai and Perron (1998) to determine the
location of structural breaks.

Table A.8
Results of long-run estimations.

Dependant variables (Gdp per capita) Without structural break With structural break

FMOLS DOLS FMOLS DOLS

β β β β

EC per capita −0.732*** −0.920*** −0.559*** −0.660***

(0.078) (0.074) (0.112) (0.121)
Dummy 0.237*** 0.239***
(0.085) (0.086)

Notes: Numbers in parentheses are standard errors. *, **, *** indicate significance at 10%, 5% and 1% levels, respectively. In estimations made with the FMOLS and DOLS methods, lag lengths
were selected in accordance with the Hannah-Quin criteria.

Table A.9
Results of dynamic panel causality tests in CIS countries.

Dependent variable Sources of causation (independent variable)

Short-run Long-run Strong causality

Δ Gdp per capita Δ EC per capita ECT Δ Gdp per capita, ECT ΔEC per capita, ECT

Δ Gdp per capita – 43.27*** −0.06*** – 82.16***

Δ EC per capita 45.94*** – −0.46*** 231.53*** –

Notes: The table displays the Wald chi-squared test statistics' empirical realizations for short-run and strong causality. In parentheses, the sum of the lagged coefficients for each short-run
change is shown. As shown, the lag length is two. ECT refers to the coefficient of the error-correction terms as εy and εe, respectively. ∗∗∗, ∗∗, and ∗ show that the null hypothesis of no
causation is rejected at the 1%, 5%, and 10% levels, respectively.
194 C. Aydin, Ö. Esen / Energy Economics 69 (2018) 185–195
Appendix B
Fig. B.1. Variables graphics.
Appendix C. Supplementary data
Supplementary data to this article can be found online at https://doi.
org/10.1016/j.eneco.2017.11.010.
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