Globalization and politico‐administrative factor‐driven energy‐growth nexus: A case of South Asian economies

• Published date: 01 December 2022
• Author: Md. Monirul Islam,Md. Saiful Islam
• Date: 01 December 2022
• DOI: http://doi.org/10.1002/pa.2736

RESEARCH ARTICLE

Globalization and politico-administrative factor-driven

energy-growth nexus: A case of South Asian economies

Md. Monirul Islam

1

| Md. Saiful Islam

2

1

Department of Governance and Public Policy,

Bangladesh Institute of Governance and

Management (BIGM), University of Dhaka,

Dhaka, Bangladesh

2

Department of Economics & Finance, College

of Business Administration, University of Hail,

Hail, Saudi Arabia

Correspondence

Md. Saiful Islam, Department of Economics &

Finance, College of Business Administration,

University of Hail, Hail, Saudi Arabia.

Email: saifecon@yahoo.com

In modern days, economic growth is energy-dependent and vice versa. Earlier studies

concentrated a bit to analyze the influence of globalization and politico-

administrative factors on the energy consumption-economic growth nexus in devel-

oping economies. The motivation for the current research is to scrutinize the energy

consumption-economic growth nexus while accounting for the influence of globaliza-

tion and country risk indicators—the politico-administrative factors in a panel of

4 South Asian countries (Bangladesh, India, Pakistan, and Sri Lanka) during 1980–

2018. To check the issues of heterogeneity and cross-sectional independence, the

study employs the pooled mean group estimation method. The investigated results

provide a nexus between energy consumption and economic growth where globaliza-

tion - a long-run force positively affects this nexus in the long run and negatively in

the short run. Besides, the politico-administrative factors have an adverse impact in

the long run and an insignificant effect on this nexus in the short run. The

Dumitrescu–Hurlin non-causality test establishes the feedback hypothesis con-

cerning energy consumption-economic growth nexus in South Asian economies. The

study results remain robust across the dynamic ordinary least square estimator.

Therefore, this study suggests sustaining the energy-growth nexus to properly handle

globalization and politico-administrative and the Covid-19 pandemic issues through

institutional quality. Moreover, the objective-oriented policies are critical to strength-

ening the energy-growth nexus without decaying environmental quality in South

Asian countries.

KEYWORDS

country risk indicator, economic growth, energy consumption, globalization, South Asia

1|INTRODUCTION

Energy is considered a key instrument for the production and opera-

tion of all types of goods and services in economies. Therefore, the

spectacular growth of the world economies is largely dependent on

energy consumption. More importantly, energy infrastructures (EIs)

stimulate the economic growth process and improve the life standard

of people (Singh & Vashishtha, 2020b). Also, energy efficiency has

become instrumental in developing the quality of people's life and

wellbeing. National Energy Policy drafted by NITI Aayog highlights

energy efficiency as a unique force in obtaining its four important tar-

gets, including access to affordable energy, increased security for

energy, and its independence, sustainability, and growth in the econ-

omy (Singh & Vashishtha, 2020a). On the other hand, if an economy is

developed using energy input, governments of different countries

should adopt energy-efficient policies. These policies include an effec-

tive and strategic way of favoring multifarious goals to promote

impressive energy access; offer more energy services for households

and businesses; encourage energy-efficient equipment, productions,

and services for market growth; decrease adverse climatic and

Received: 22 March 2021 Revised: 18 July 2021 Accepted: 26 July 2021

DOI: 10.1002/pa.2736

J Public Affairs. 2022;22(Suppl. 1):e2736. wileyonlinelibrary.com/journal/pa © 2021 John Wiley & Sons Ltd. 1of16

https://doi.org/10.1002/pa.2736

environmental effects and improve the security of energy. Thus,

energy consumption and economic growth are positively related to

each other in an economy.

On the other hand, energy consumption and income growth are

not always related to each other (Joyeux & Ripple, 2007;

Jumbe, 2004; Lee, 2005) and in some cases, the adverse association

between them exists in the perspective of different developing and

under-developing economies (Carfora et al., 2019; Squalli, 2007). This

happens as these countries lack proper energy management policies

and energy infrastructural facilities that keep both the people and

industries away from consuming and utilizing energy resources for

production as well as economic growth. The capacities of the states

are mainly responsible for impeding energy-induced economic growth

and growth-driven energy consumption in these countries.

The interrelated linkage between energy consumption and eco-

nomic growth is largely stimulated by globalization for different econ-

omies. Globalization entails homogenization (Waltz, 1999) and

integration in economic, political, and social affairs among different

countries (M. M. Islam, 2019). Keohane and Nye (2000) and M. M.

Islam (2019) illustrated “globalization as economic globalization—

described as long-distance movements of capitals, goods, and services

as well as information and ideas, which accompany the exchanges of

the market; political globalization—expounded by a dispersion of gov-

ernmental policies; and social globalization—disclosed as the flows of

information, ideas, images, and people.”This integrated principle

of globalization makes people's life convenient to boost up consump-

tion, advance technology diffusion, and ensure various socioeconomic

and political adaptations and developments (M. M. Islam &

Islam, 2021). More importantly, the energy consumption level of peo-

ple significantly relies on the globalization process as globalization/

economic globalization and trade liberalization by removing trade bar-

riers facilitate outputs and income flows among countries. A country

strives to participate in diverse global agencies, associate with world-

wide NGOs, sign international agreements to promote political global-

ization (UNCTAD, 2017). Besides, the subscription and purchase of

telephones and cellular phones, and the arrangement of tourists' easy

visa process are related to social globalization (World Bank, 2020b).

Thus, economic, political, and social dimensions of globalization

develop EIs, enhance people's energy-related activities, energy con-

sumption, and hence, economic growth (M. M. Islam et al., 2021).

Globalization is aggregately considered a key stimulus to the con-

sumption of more energy, which is investigated in much empirical lit-

erature (Shahbaz et al., 2018a). Some empirical shreds of evidence

such as Akarca and Long (1980); Wolde-Rufael (2005); Chang and

Berdiev (2011) and Marques and Fuinhas (2016) support that a

greater level of energy use induced by the flow of globalization leads

to the prosperity of world community by enabling them to lead a stan-

dard life and stimulate economic development.

Globalization is a long-run external force that harnesses both

energy consumption and economic growth. This process of

globalization-driven energy-growth nexus does not work properly if

there is a lack of stable human rights situations in countries. If human

rights are violated due to the existence of political instability, the

energy consumption-economic growth nexus is constrained (M. M.

Islam & Islam, 2021). This sort of country risk indicator (CRI) leads to

negative externality that is, making the globalization process dysfunc-

tional. The CRI include socio-economic crisis, internal conflict, external

conflict, corruption, military in politics, religious tensions, vulnerable

law and order situation, ethnic tensions, undemocratic rules, and inef-

ficient bureaucracy, etc. (PRS Group, 2019). The lack of due role of

these politico-administrative elements of the country somewhat moti-

vates political terrorization, resulting in political instability. The rela-

tionship between political instability and economic growth can be

explained by analyzing Grossman's (1991) theory of revolutions. He

claims that if a country's government is comparatively weak, the

chance of revolution is high. It implies that the weak ability of a gov-

ernment hardly meets up the demands of the general masses. There-

fore, this situation instigates people to follow the revolutionary way

rather than the productive way of market growth.

Besides, volatile state-affairs such as processions, hartals

(shutdown), strikes and violence, crimes, coups and counter-coups,

the reversal of regimes, and the overthrow of governments through

agitations are usually associated with political instability. This unstable

circumstance pushes a state for reaching the state of a “failed state”

(Alesina et al., 1996). In addition, investment and business environ-

ments are highly hindered by political uncertainty as entrepreneurs,

clients, buyers, and stakeholders are usually failed to move properly

for business and take proper decisions. As a result, this vulnerable

condition poses a serious threat to the performance of macroeco-

nomic indicators and economic growth (Murad & Alshyab, 2019).

Political instability promotes political terrorization in which various

terrorist groups intend to demolish the energy transmission infrastruc-

tures (ETIs) by hindering proper energy supplies, consumption,

and hence, economic growth (Toft et al., 2010). Overall, it can be

concluded that the politico-administrative dynamic such as CRI may

influence the energy consumption-economic growth nexus in econo-

mies especially developing economies.

Deviated from man-made disasters, natural calamities, chronic

diseases, viruses like the Covid-19 pandemic have become significant

elements to affect global economic growth. Due to the effect of a

novel coronavirus, mostly the developing countries have been facing

serious disasters in the different fields of economy and society

(Kumar & Pinky, 2020; Q. Wang & Su, 2020). Job loss, inequality, pov-

erty, and the overall low living standard of the people have been the

ultimate consequence of different economies (Hossain, 2021).

Through demolishing public health, the Covid-19 pandemic has

adversely reduced economic activities and hence economic growth

(Alhassan et al., 2020). The energy consumption level of the people

has highly been hindered due to the pandemic. On the other hand,

the risk of the Covid-19 pandemic has forced world people to bring a

substantial change in their lifestyle concerning energy consumption.

During the lockdown, people stay in the house that has increased

household-level consumption of energy (Rouleau & Gosselin, 2021).

But the industrial use of energy has decreased because of the shut-

down of energy-intensive mills and factories in different countries

(Q. Wang & Su, 2020). Moreover, in recent years, the risk of Covid-19

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