Exploring energy consumption trends: Insights from developed and developing nations

Abstract

This study investigates the determinants of energy consumption, with a primary focus on energy prices, and explores whether human capital moderates the relationship between energy prices and energy consumption across developed and developing countries. Using the generalized method of moments (GMM) for empirical analysis, the study examines data from 81 countries over a 33-year period from 1990 to 2023. The findings reveal that an increase in energy prices leads to reduced energy consumption in both developed and developing nations. Furthermore, the moderating role of human capital suggests that energy prices and human capital act as substitutes in influencing energy consumption. Specifically, the conditional analysis indicates that when human capital transitions from lower to higher levels, energy prices exert a more detrimental effect on energy consumption. These insights have practical implications, particularly highlighting the importance of investing in human capital to enhance energy efficiency. The study suggests that policymakers worldwide should prioritize investments in higher education, as this can lead to improved energy efficiency through the positive link between human capital and energy use. To the best of the authors' knowledge, this is the first comprehensive empirical study examining the role of human capital in the relationship between energy prices and energy consumption in both developed and developing countries.