Electricity intensity and unemployment in South Africa: A quantile regression analysis

Ruzive, Tafadzwa and Mkhombo, Thando and Mhaka, Simba and Mavikela, Nomahlubi and Phiri, Andrew (2017): Electricity intensity and unemployment in South Africa: A quantile regression analysis.

Abstract

Our study investigates the relationship between electricity intensity and unemployment in South Africa. Our mode of empirical investigation is the quantile regressions approach which has been applied to quarterly interpolated time series data collected between 2000:01 and 2014:04. As a further development to our study, we split our empirical data into two sub-samples, the first corresponding to the pre-financial crisis period and the other corresponding to the post-financial crisis period. Our empirical results point to electricity intensity being significantly and positively correlated with unemployment in periods before the crisis at all estimated quantiles, whereas this relationship turns significantly negative in periods subsequent to the crisis at all quantile levels. In other words, since the financial crisis, increased electricity intensity (i.e. lower electricity efficiency) appears to reduce domestic unemployment rates, a result which indicates that policymakers should be discouraged from implementing electricity conversation strategies and encouraged to rely on environmental friendly methods of supplying electricity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Electricity intensity; Unemployment; South Africa; SSA; Quantile regressions
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Adom P. and Kwakwa P. (2014), “Effects of changing trade structure and technical characteristics of the manufacturing sector on energy intensity in Ghana”, Renewable and Sustainable Energy Reviews, 35, 475-483.

Adom P. (2015), “Determinants of energy intensity in South Africa: Testing for structural effects in parameters”, Energy, 89, 334-346.

Amusa, H., Amusa, K. and Mabugu, R. (2009), "Aggregate demand for electricity in South Africa: An analysis using the bounds testing approach to cointegration", Energy Policy, 37(10), 4167-4175.

Aiyagari S., Christiano L. and Eichenbaum M. (1992), “The output, employment and interest rate effects of government consumption”, Journal of Monetary Economics, 30(1), 73-86.

Bilgili F., Kocak E., Bulut U. and Kuloglu A. (2017), “The impact of urbanization on energy intensity: Panel data evidence considering cross-sectional dependence and heterogeneity”, Energy, 133, 242-256.

Calcagnini G., Giombini G. and Travaglini G. (2016), “Modelling energy intensity, pollution per capita and productivity in Italy: A structural VAR approach”, Renewable and Sustainable Energy Reviews, 59, 1482-1492.

Deloitte. (2009), “Estimating the Elasticity of Electricity Prices in South Africa” Johannesburg.

Department of Energy. (2012), “Energy Price Report 2011”. Pretoria.

Department of Minerals and Energy (2005),” Energy efficiency strategy of the Republic of South Africa”, Pretoria: Department of Minerals and Energy.

Domenech R. and Garcia J. (2008), “Unemployment, taxation and public expenditure in OECD countries”, European Journal of Political Economy, 24(1), 202-217.

Elliot R., Sun P. and Chen S. (2013), “Energy intensity and foreign direct investment: A Chinese city-level study”, Energy Economics, 40, 484-494.

Elliot R., Sun P. and Zhu T. (2017), “The direct and indirect effect of urbanization on energy intensity: A provincial-level study for China”, Energy, 123, 677-692.

Filipovic S., Verbic M. and Radovanovic M. (2015), “Determinants of energy intensity in the European Union: A panel data analysis”, Energy, 92(3), 547-555.

Galli R. (1998), “The relationship between energy intensity and income levels: Forecasting long term energy demand in Asian emerging countries”, The Energy Journal, 19(4), 85-105.

Gali J., Smets F. and Wouters R. (2012), “Unemployment in an estimated New Keynesian model”, NBER Macroeconomics Annual, 26(1), 329-360.

Gaston N. and Rajaguru G. (2013), “How an export boom affects unemployment”, Economic Modelling, 30, 343-355.

Guerrazzi M. 2015), “Animal spirits, investment and unemployment: An old Keynesian view of the Great Depression”, EconomiA, 16, 343-358.

Herreias M. and Liu G. (2013), “Electricity intensity across Chinese provinces: New evidence on convergence and threshold effects”, Energy Economics, 36, 268-276.

Huang J. and Yu S. (2016), “Effects of investment on energy intensity: Evidence from China”, Chinese Journal of Population Resources and Environment, 14(3), 197-207.

Inglesi-Lotz, R., and Blignaut, J. N. (2011), “Estimating the price elasticity of demand for electricity by sector in South Africa”, South African Journal of Economic and Management Sciences, 14(4), 449-465.

Inglesi-Lotz, R., and Blignaut, J. N. (2012), “Electricity intensities of the OECD and South Africa: A comparison”, Renewable and Sustainable Energy Reviews, 16(7), 4491-4499.

International Energy Agency (2013), “World Energy Outlook 2013. International Energy Agency, Paris, France.

Kepplinger D., Templ M. and Upadhyaya S. (2013), “Analysis of energy intensity in manufacturing industry using mixed-effects models”, Energy, 59, 754-763.

Khobai H. and Le Roux P. (2017), “The relationship between energy consumption, economic growth and carbon dioxide emission: The case of South Africa”, International Journal of Energy Economics and Policy, 7(3), 102-109.

Khan R. (1931), “The relation of home investment to unemployment”, The Economic Journal, 41(162), 173-198.

Koenker R. and Bassett G. (1978), “Regression quantiles”, Econometrica, 46, 33-50.

Kohler, M. (2014), “Differential Electricity Pricing and Energy Efficiency in South Africa”, Energy, 524-532.

Liddle B. (2009), “Electricity intensity convergence in IEA/OECD countries: Aggregate and sectoral analysis”, Energy Policy, 37, 1470-1478.

Liu Y. and Xie Y. (2013), “Asymmetric adjustment of the dynamic relationship between energy intensity and urbanization in China”, Energy Economics, 36, 43-54.

Ma B. (2015), “Does urbanization affect energy intensities across provinces in China? Long-run elasticities estimation using dynamic panels with heterogeneous slopes”, Energy Economics, 49, 390-401.

Mulder P., de Groot H., Pfeiffer B. (2014), “Dynamics and determinants of energy intensity in the service sector: A cross-country analysis”, Ecological Economics, 100, 1-15.

Nell K. (2006), “Structural change and nonlinearities in Phillips curve model for South Africa”, Contemporary Economic Policy, 24(4), 600-617.

Odhiambo N. (2009), "Electricity consumption and economic growth in South Africa: A trivariate causality test", Energy Economics, 31(5), 635-640.

Phiri A. (2015), “Nonlinear cointegration between unemployment and economic growth in South Africa”, Managing Global Transitions, 12(4), 303-324.

Phiri A. (2016), “Examining asymmetric effects in the South African Phillips curve: Evidence from a logistic smooth transition regression models”, International Journal of Sustainable Economy, 8(1), 18-42.

Phiri A. and Nyoni B. (2015), “Re-visiting the electricity growth nexus in South Africa”, Studies in business and Economics, 11(1), 97-111.

Rafiq S., Salim R. and Nielsen I. (2016), “Urbanization, openness, emissions, and energy intensity: A study of increasingly urbanized emerging economies”, Energy Economics, 56, 20-28.

Sabrahmanya B. (2006), “Energy intensity and economic performance in small scale bricks and foundry cluster in India: Does energy intensity matter?”, Energy Policy, 34, 489-497.

Sadorsky P. (2013), “Do urbanization and industrialization affect energy intensity in developing countries?”, Energy Economics, 37, 52-59.

Smith R. and Zoega G. (2009), “Keynes, investment, unemployment and expectations”, International Review of Applied Economics, 23(4), 427-444.

Sweidan O. and Alwaked A. (2016), “Economic development and the energy intensity of human well-being: Evidence from the GCC countries”, Renewable and Sustainable Energy Reviews, 55, 1363-1369.

Wang C. (2013), “Changing energy intensity of economies in the world and it’s decomposition”, Energy Economics, 40, 637-644.

Winkler H. (2007), “Energy policies for sustainable development in South Africa”, Energy for Sustainable Development, 11(1), 26-34.

Young L. (1991), “Unemployment and the optimal export-processing zone”, Journal of Development Economics, 37(1-2), 369-385.

Yuan M. and Li W. (2000), “Dynamic employment and hours effects of government spending shocks”, Journal of Economics Dynamics and Control, 24(8), 1233-1263.

Yuxiang K., and Zhongchang C. (2010), “Government expenditure and energy intensity in China”, Energy Policy, 38(2), 691-694.

Zheng Y., Qi J. and Chen X. (2011), “The effect of increasing exports on industrial energy intensity in China”, Energy Policy, 39(5), 2688-2698.