Impact of Technological Innovation on Energy Efficiency in Industry 4.0 Era: Moderation of Shadow Economy in Sustainable Development

Chen, Maozhi and Sinha, Avik and Hu, Kexiang and Shah, Muhammad Ibrahim (2020): Impact of Technological Innovation on Energy Efficiency in Industry 4.0 Era: Moderation of Shadow Economy in Sustainable Development. Published in: Technological Forecasting and Social Change , Vol. 164, (2021): p. 120521.

Abstract

Despite the ongoing research on energy efficiency and innovation in the context of Industry 4.0, little is known on how degree of leakages in economy can impact the energy efficiency-innovation association. This issue has been addressed by the United Nations in their Sustainable Development Goals (SDG) report also. In the era of Industry 4.0, this issue can be crucial from the perspective of sustainable development, and we are analyzing this issue in case of Middle East and North African (MENA) countries over a period of 1990-2016. The second-generation methodological approaches have been adopted. Our results show that technological innovation has a positive impact on energy efficiency, whereas growth in shadow economy has a detrimental impact on energy efficiency. The structural transformation of economy has positive impact on energy efficiency. Based on our results, we have designed an SDG framework, which might help the MENA countries to achieve the objectives of SDG 7, SDG 8, SDG 9, and SDG 4.

• Item Type: MPRA Paper
• Language: English
• Keywords: Energy Efficiency; Technological Innovation; Sustainable Development Goals; Fisher Ideal Index; Lilien Index
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General

References

A. Chudik, M.H. Pesaran, Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors, J. Econom. 188(2) (2015) 393 420.

A. Sinha, Trilateral association between SO2/NO2 emission, inequality in energy intensity, and economic growth: A case of Indian cities, Atmos. Pollut. Res. 7(4) (2016) 647 658.

A. Sinha, J. Bhattacharya, Environmental Kuznets curve estimation for NO2 emission: A case of Indian cities, Ecol. Indic. 67 (2016) 1 11.

A. Sinha, J. Bhattacharya, Estimation of environmental Kuznets curve for SO2 emission: A case of Indian cities, Ecol. Indic. 72 (2017) 881 894.

A. Sinha, M. Shahbaz, T. Sengupta, Renewable energy policies and contradictions in causality: A case of Next 11 countries, J. Clean. Prod. 197 (2018) 73 84.

A. Sinha, T. Sengupta, O. Kalugina, M.A. Gulzar, Does distribution of energy innovation impact distribution of income: A quantile-based SDG modeling approach, Technol. Forecasting Social Change 160 (2020a) Article 120224.

A. Sinha, T. Sengupta, T., Saha, Technology policy and environmental quality at crossroads: Designing SDG policies for select Asia Pacific countries, Technol. Forecasting Social Change 161 (2020b) Article 120317.

A. Sinha, M.I. Shah, T. Sengupta, Z. Jiao, Analyzing technology-emissions association in Top-10 polluted MENA countries: How to ascertain sustainable development by quantile modeling approach, J. Environ. Manage. 267 (2020c) Article 110602.

A. Tandon, S. Ahmed, Technological change and energy consumption in India: a decomposition analysis, Innov. Dev. 6(1) (2016) 141 159.

A.A. Shamali, E.I. Bandaly, E. Elmaddah, I.H. Mansour, I. Rouabhia, K.A. Thobhani, N.E. Saim, S. Fawaz, S.A. Harthey, S.A. Serriya, S. Al-Zoghoul, M. Pouget, R. Schiffer, Energy & Climate in the MENA Region: Youth Perspective to a Sustainable Future, Friedrich Ebert Foundation, Bonn, Germany, 2019.

B. Hofman, K. Labar, Structural change and energy use: Evidence from China’s provinces, China Working Paper Series No. 6, World Bank, 2007.

B. Lin, J. Zhu, Chinese electricity demand and electricity consumption efficiency: Do the structural changes matter?, Appl. Energy 262 (2020) Article 114505.

C. Diks, V. Panchenko, A new statistic and practical guidelines for nonparametric Granger causality testing, J. Econ. Dyn. Control 30(9-10) (2006) 1647 1669.

C.M. Jarque, A.K. Bera, A test for normality of observations and regression residuals, Int. Stat. Rev. 55(2) (1987) 163 172.

Cross-Sectoral Coordination Centre (CSCC), Latvia - Review on SDG Implementation, UN 2018, Republic of Latvia, 2018.

E. Dogan, B. Altinoz, M. Madaleno, D. Taskin, The impact of renewable energy consumption to economic growth: a replication and extension of Inglesi-Lotz (2016), Energy Economics 90 (2020) Article 104866.

E. Dogan, R. Inglesi-Lotz, The impact of economic structure to the environmental Kuznets curve (EKC) hypothesis: evidence from European countries, Environ. Sci. Pollut. Res. 27 (2020) 12717 12724.

E. Göll, A. Uhl, J. Zwiers, Sustainable Development in the MENA Region, Middle East and North Africa Regional Architecture, 2019.

E. Menichettti, A. El Gharras, S. Karbuz, Material factors for the MENA region: Energy trends. Middle East and North Africa Regional Architecture, 2017.

F. Bonnet, J. Vanek, M. Chen, Women and men in the informal economy: A statistical brief. International Labour Office, Geneva, 2019.

F. Guang, Electrical energy efficiency of China and its influencing factors, Environ. Sci. Pollut. Res. 27 (2020) 32829 32841.

Foundation for European Progressives Studies (FEPS), Progressive Lab for Sustainable Development: From Vision to Action, Rue Montoyer, Brussels, 2017.

Global Compact Network Poland (GCNP), SDG implementation in Poland: Progress report 2018, United Nations Global Compact Network, 2018.

H. Liu, Z. Zhang, T. Zhang, L. Wang, Revisiting China’s provincial energy efficiency and its influencing factors, Energy 208 (2020) Article 118361.

H. Sun, B.K. Edziah, C. Sun, A.K. Kporsu, Institutional quality, green innovation and energy efficiency, Energy Policy 135 (2019) Article 111002.

H. Wang, M. Wang, Effects of technological innovation on energy efficiency in China: Evidence from dynamic panel of 284 cities, Sci. Total Environ. 709 (2020) Article 136172.

I. Fisher, The best form of index number, J. Am. Stat. Assoc. 17(133) (1921) 533 551.

International Energy Agency (IEA), Capturing the multiple benefits of energy efficiency, OECD, 2014.

International Institute for Sustainable Development (IISD), 2017. Initiatives Enhance Adaptation in the MENA Region. https://sdg.iisd.org/news/initiatives-enhance-adaptation-in-the-mena-region/

International Institute for Sustainable Development (IISD), 2018. PAGE Shows Way to Green Economic Transition through Industrial Policy. https://sdg.iisd.org/news/page-shows-way-to-green-economic-transition-through-industrial-policy/

International Peace Institute (IPI), 2020. IPI MENA Director Highlights Role of Innovation in 2030 Agenda for Sustainable Development. https://www.ipinst.org/2020/09/ipi-mena-role-of-innovation-in-2030-agenda

International Renewable Energy Agency (IRENA), Energy transformation 2050, 2020.

J. Malinauskaite, H. Jouhara, B. Egilegor, F. Al-Mansour, L. Ahmad, M. Pusnik, Energy efficiency in the industrial sector in the EU, Slovenia, and Spain, Energy 208 (2020) Article 118398.

J. Westerlund, D.L. Edgerton, A simple test for cointegration in dependent panels with structural breaks, Oxf. Bull. Econ. Stat. 70(5) (2008) 665 704.

J.B. Ramsey, Tests for specification errors in classical linear least‐squares regression analysis. J. R. Stat. Soc. Series B Stat. Methodol. 31(2) (1969) 350 371.

J.C. Farla, K. Blok, Energy efficiency and structural change in the Netherlands, 1980–1995: influence of energy efficiency, dematerialization, and economic structure on national energy consumption, J. Ind. Ecol. 4(1) (2000) 93 117.

J.M. Wooldridge, Econometric Analysis of Cross Section and Panel Data, MIT Press, Cambridge, MA, 2002.

K. Fisher-Vanden, G.H. Jefferson, M. Jingkui, X. Jianyi, Technology development and energy productivity in China, Energy Econ. 28(5-6) (2006) 690 705.

K. Sohag, R.A. Begum, S.M.S. Abdullah, M. Jaafar, Dynamics of energy use, technological innovation, economic growth and trade openness in Malaysia, Energy 90 (2015) 1497 1507.

K. Wasniewski, Energy efficiency as manifestation of collective intelligence in human societies, Energy 191 (2020) Article 116500.

L. Cao, The dynamics of structural and energy intensity change, Discrete Dyn. Nat. Soc. 2017 (2017) Article 6308073.

L. Jin, K. Duan, X. Tang, What is the relationship between technological innovation and energy consumption? Empirical analysis based on provincial panel data from China. Sustainability 10(1) (2018) Article 145.

L. Medina, F. Schneider, Shadow economies around the world: what did we learn over the last 20 years?, IMF working paper no. WP/18/17, International Monetary Fund, 2018.

M. Döring, R.E. Golli, Country Fact Sheet Tunisia: Energy and development at a glance 2018, MENA Select, 2019.

M. Galeotti, S. Salini, E. Verdolini, Measuring environmental policy stringency: Approaches, validity, and impact on environmental innovation and energy efficiency, Energy Policy 136 (2020) Article 111052.

M. Shahbaz, D. Balsalobre-Lorente, A. Sinha, Foreign direct Investment–CO2 emissions nexus in Middle East and North African countries: Importance of biomass energy consumption, J. Clean. Prod. 217 (2019) 603 614.

M. Sheikh, 2020. A cashless economy could boost the MENA region. Center for international private enterprise. https://www.cipe.org/blog/2020/08/10/a-cashless-economy-could-boost-the-mena-region/

M.A. Destek, A. Sinha, Renewable, non-renewable energy consumption, economic growth, trade openness and ecological footprint: Evidence from organisation for economic Co-operation and development countries, J. Clean. Prod. 242 (2020) Article 118537.

M.F. Mabrouk, 2020. Egypt’s sizeable informal economy complicates its pandemic response. https://www.mei.edu/blog/egypts-sizeable-informal-economy-complicates-its-pandemic-response

M.H. Pesaran, A simple panel unit root test in the presence of cross‐section dependence, J. Appl. Econ. 22(2) (2007) 265 312.

M.H.M. Saudi, O. Sinaga, D. Roespinoedji, E.K. Ghani, The Impact of Technological Innovation on Energy Intensity: Evidence from Indonesia, Int. J. Energy Econ. Policy 9(3) (2019) 11 17.

M.M. Alam, M.W. Murad, The impacts of economic growth, trade openness and technological progress on renewable energy use in organization for economic co-operation and development countries, Renew. Energy 145 (2020) 382 390.

M.M. Basbay, C. Elgin, O. Torul, Energy consumption and the size of the informal economy, Economics 10(2016-14) (2016) 1 28.

M.W. Zafar, M. Shahbaz, F. Hou, A. Sinha, From nonrenewable to renewable energy and its impact on economic growth: the role of research & development expenditures in Asia-Pacific Economic Cooperation countries, J. Clean. Prod. 212 (2019a) 1166 1178.

M.W. Zafar, S.A.H. Zaidi, A. Sinha, A. Gedikli, F. Hou, The role of stock market and banking sector development, and renewable energy consumption in carbon emissions: insights from G-7 and N-11 countries, Resour. Policy 62 (2019b) 427 436.

M.W. Zafar, M. Shahbaz, A. Sinha, T. Sengupta, Q. Qin, How renewable energy consumption contribute to environmental quality? The role of education in OECD countries, J. Clean. Prod. 268 (2020) Article 122149.

OECD, Better Policies for Inclusive Growth and Economic Integration in the MENA Region, 2016.

P. Fragkos, N. Tasios, L. Paroussos, P. Capros, S. Tsani, Energy system impacts and policy implications of the European Intended Nationally Determined Contribution and low-carbon pathway to 2050, Energy Policy 100 (2017) 216 226.

P. Garonna, F.G. Sica, Intersectoral labour reallocations and unemployment in Italy, Labour Econ. 7(6) (2000) 711 728.

P. Mlambo-Ngcuka, R.D.S.D. Alwis, Redefining Leadership in the Age of the SDGs: Accelerating and Scaling Up Delivery Through Innovation and Inclusion, Center of the Legal Profession, Harvard Law School, 2019.

P. Mulder, H.L. De Groot, Structural change and convergence of energy intensity across OECD countries, 1970–2005, Energy Econ. 34(6) (2012) 1910 1921.

P. Smith, Assessing the size of the underground economy. The Canadian statistical perspectives, Can. Econ. Obs. 11 (1994) 16 33.

Q. Fei, R. Rasiah, Electricity consumption, technological innovation, economic growth and energy prices: does energy export dependency and development levels matter?, Energy Procedia 61 (2014) 1142 1145.

R. Benkraiem, A. Lahiani, A., Miloudi, M. Shahbaz, The asymmetric role of shadow economy in the energy-growth nexus in Bolivia, Energy Policy 125 (2019) 405 417.

R. Gatti, M. Morgandi, G. Rebekka, S. Brodmann, S., Angel-Urdinola, D., Moreno, J.M., Marotta, D., Schiffbauer, M., Mata Lorenzo, E., 2013. Jobs for shared prosperity: Time for action in the Middle East and North Africa. The World Bank.

R. Nepal, N. Paija, Energy security, electricity, population and economic growth: The case of a developing South Asian resource-rich economy. Energy Policy, 132 (2019) 771 781.

S.R. Paramati, A. Sinha, E. Dogan, The significance of renewable energy use for economic output and environmental protection: evidence from the Next 11 developing economies, Environ. Sci. Pollut. Res. 24(15) (2017) 13546 13560.

T. Owoeye, D.B. Olanipekun, A.J. Ogunsola, A.A. Kutu, Energy Prices, Income and Electricity Consumption in Africa: The Role of Technological Innovation, Int. J. Energy Econ. Policy 10(5) (2020) 392 400.

T. Yang, W. Chen, K. Zhou, M. Ren, Regional energy efficiency evaluation in China: A super efficiency slack-based measure model with undesirable outputs, J. Clean. Prod. 198 (2018) 859 866.

T.S. Breusch, A.R. Pagan, A simple test for heteroscedasticity and random coefficient variation. Econometrica 47(5) (1979) 1287 1294.

United Nations, Accelerating SDG 7 achievement: SDG 7 policy briefs in support of the High-Level Political Forum 2019, 2019.

United Nations, Pathways to Sustainable Energy - Accelerating Energy Transition in the UNECE Region, 2020.

United Nations Industrial Development Organization (UNIDO), Accelerating clean energy through Industry 4.0: Manufacturing the next revolution, 2018.

United Nations Statistics Division (UNSD), 2019. UN data. http://data.un.org/.

V. Roy, S. Singh, Mapping the business focus in sustainable production and consumption literature: Review and research framework, J. Clean. Prod. 150 (2017) 224 236.

V. Roy, T. Schoenherr, P. Charan, The thematic landscape of literature in sustainable supply chain management (SSCM), Int. J. Oper. Prod. Manag. 38(4) (2018) 1091 1124.

W. Ali, I.U. Rahman, M. Zahid, M.A. Khan, T. Kumail, Do technology and structural changes favour environment in Malaysia: An ARDL-based evidence for environmental Kuznets curve, Environ. Dev. Sustain. 22 (2019) 7927 7950.

World Bank, 2019. World Development Indicators. https://data.worldbank.org/indicator

X. Ouyang, J. Chen, K. Du, Energy efficiency performance of the industrial sector: From the perspective of technological gap in different regions in China, Energy (2020) Article 118865.

X. Pan, B. Ai, C. Li, X. Pan, Y. Yan, Dynamic relationship among environmental regulation, technological innovation and energy efficiency based on large scale provincial panel data in China, Technol. Forecasting Social Change, 144 (2019a) 428 435.

X. Pan, M.K. Uddin, C. Han, X. Pan, Dynamics of financial development, trade openness, technological innovation and energy intensity: Evidence from Bangladesh, Energy 171 (2019b) 456 464.

Y. Eilat, C. Zinnes, The shadow economy in transition countries: Friend or foe? A policy perspective, World Dev. 30(7) (2002) 1233 1254.

Y. Zhang, Energy Rebound Effect Analysis Based on Technological Progress, IOP Conf. Ser. Earth Environ. Sci. 300(4) (2019) Article 042035.