Investigating the effects of crony capitalism on energy intensity through the PQARDL Approach

Improving energy efficiency and reducing energy intensity are key priorities for sustainable economic development, as excessive energy consumption contributes to environmental degradation and resource depletion. However, institutional and economic distortions, particularly those stemming from crony capitalism, may undermine energy efficiency efforts by fostering inefficient energy use and weakening regulatory frameworks. Despite its potential significance, the relationship between crony capitalism and energy intensity has received limited attention in the literature. Addressing this gap, this study investigates the influence of crony capitalism on energy intensity across 73 countries from 2000 to 2021, employing the Panel Quantile Autoregressive Distributed Lag (PQARDL) approach. To accomplish this objective, a composite index has been constructed by combining indicators closely associated with crony capitalism. This composite proxy is developed through the integration of the International Country Risk Guide (ICRG) indicators, worldwide governance indicators, and measures of economic freedom. This index, formulated using principal component analysis (PCA), exhibits an inverse association with the extent of crony capitalism. The findings reveal that crony capitalism exacerbates energy intensity, with its impact being more pronounced at higher quantiles. Moreover, in the short run, a comparable pattern is observed. Additionally, the short-run coefficients systematically exceed their long-run counterparts.