Lembaga Penyelidikan Ekonomi dan Masyarakat – Fakultas Ekonomi dan Bisnis – Universitas Indonesia

How to Fuel Better? Assessing the Impact of Energy Use on Industrialization in Developing Countries

Abstract

Industrialization is the engine of economic growth. Most of the developing countries shifted from agriculture towards industrialization with the motivation of pursuing higher economic growth since the last few decades. Past studies have shown that there is clear evidence of a strong correlation between energy consumption and economic growth. Hence, this paper aims to contributes on the topic of energy consumption and how it impacts the level of economic growth through industrialization. Our ?ndings show that the association between use of energy at manufacturing sector, which have been proxied using amount of re?ned energy and petroleum allocated to manufacturing sector, and the development of manufacturing sector, which have been proxied using level of GDP on manufacturing sector, is not a mere correlation.  Estimations using lagged independent variable proves that an increase on use of energy at manufacturing sector has a positive and, to some extent, signi?cant impact on the expansion of manufacturing sector. Furthermore, this study also ?nds that the effect of use of energy on manufacturing sector on the expansion of manufacturing sector seems to be weaker and even becomes insigni?cant on the Non-ASEAN Plus countries. One factor that might explain such phenomena is the difference on the commitment from each country to allocate energy for the development of their manufacturing sector. The energy allocation refers to the share of energy which ?ows to the manufacturing sector instead to other non-manufacturing sector, such as agriculture, services, or even consumption. Higher share of energy which ?ows to the manufacturing sector indicates a commitment by the government and/or the society to mobilize resource and energy to better leverage the development of the manufacturing sector which ultimately lead to the economic growth. Another factor that might contribute to higher share of energy use is wage as lower wage in ASEAN Plus countries enables the ?rm and industry to hire more labor; hence expanding their scale of production. The bigger production scale implies they might have a higher economies-of-scale which translated into a more ef?cient energy use.

Download (PDF, 872KB)

Publikasi Terbaru

Harga Biji Kopi Fluktuatif Usaha Roastery dan Coffee Shop Antisipatif – TRADE AND INDUSTRY BRIEF Juni, 2024

Juli 12, 2024

Inflasi Bulanan, Juli 2024 – Seri Analisa Makroekonomi

Juli 3, 2024

Analysis of Korean’s ODA Projects in Indonesia: Development Demands, Projects Performance, and Satisfaction

Juli 2, 2024

Kondisi Permintaan Tenaga Kerja Indonesia – Labor Market Brief, Juni 2024

Juni 30, 2024

Publikasi Terkait

harga biji kopi

Harga Biji Kopi Fluktuatif Usaha Roastery dan Coffee Shop Antisipatif – TRADE AND INDUSTRY BRIEF Juni, 2024

inflasi juli

Inflasi Bulanan, Juli 2024 – Seri Analisa Makroekonomi

Korea in Indonesia

Analysis of Korean’s ODA Projects in Indonesia: Development Demands, Projects Performance, and Satisfaction