Interpreting the Dynamic Nexus between Green Energy, Employment, Fossil Fuel Energy, and Human Development Index: A Panel Data Investigation

Abstract

This study examines the dynamic connection between green energy, employment, fossil fuel energy, and human development index including additional variables such as education, life expectancy, and poverty in panel data of 30 developing countries from 1990–2017. Previous studies analyzed the total energy consumption on the human development index, whereas the differential effect of green and fossil fuel energy with employment and human development index has not been examined. The empirical exercise is based on the panel co-integration test, panel fully modified ordinary least squares, dynamic ordinary least squares, and vector error correction estimation approaches. The results reveal that all variables are co-integrated. The results of regression analysis indicate that green energy, education, life expectancy, and employment increase the human development index, but fossil fuel energy and poverty decrease the human development index by −0.016 and 0.023%. In addition, the vector error correction model designates that there is bidirectional causality between green energy consumption and the human development index. Therefore, for developing countries, the development and utilization of green energy sources (wind, solar, geothermal, etc.) are needed. Moreover, these countries should rely less on fossil fuel energy because it causes a decrease in the HDI.