Do fossil fuel and renewable energy consumption affect total factor productivity growth? Evidence from cross-country data with policy insights

Abstract

This study examines whether types of energy consumption affects the total factor productivity (TFP) growth. Using annual data of 1981–2013 for the panel sample of 36 countries, the results show that fossil fuel consumption declines the TFP growth, whereas, renewable energy consumption boosts the TFP growth. However, the results vary across different sub-panels. Further, the results from panel Granger causality support the feedback hypothesis in the long-run, whereas, weak evidence is found in the short-run. Since our findings supported feedback hypothesis, thus, policy should focus on reducing fossil fuel and using more renewable energy for achieving a ‘‘win-win’’ position of sustainable higher productivity growth with protective environmental quality in the long-run.