The Relationship between Unemployment Rates and Renewable Energy Consumption: Evidence from Fourier ADL Cointegration Test

Abstract

Unemployment remains an unsolved problem for both developing and developed countries. Solving this problem is one of the important aims for policymakers. In this study, we try to answer the question that whether new energy technologies create new employment areas or not and help to solve unemployment problem. To this end, we use a recently introduced cointegration test that allows structural breaks whose number, location, and form do not affect the accuracy of the test, to examine the long - term relationship between unemployment rates and renewable energy consumption for selected countries of the Organisation for Economic Co-operation and Development (OECD). The results show that there is a cointegration relationship between the variables for Australia, Austria, Chile, France, Germany, Japan, Mexico, Portugal, Spain and United States. The results show that renewable energy consumption positively affects the unemployment rates for Austria, Portugal, and Spain, while it negatively affects the unemployment rates for Australia, Chile, France, Germany, and Japan.

Keywords

• Fourier ADL cointegration test
• unemployment
• renewable energy consumption

References

1. Abdmouleh, Z., Alammari, R.A.M., Gastli, A. 2015. Review of policies encouraging renewable energy integration & best practices. Renewable and Sustainable Energy Reviews 45, 249-262. Altuntaşoğlu, Z., 2009. Yerli rüzgâr enerji teknoloji üretimi destek politikaları ve Türk mevzuatı. TMMOB Türkiye VI. Enerji Sempozyumu-Küresel Enerji Politikaları ve Türkiye Gerçeği 377-389. Apergis, N., Salim, R., 2015. Renewable energy consumption and unemployment: evidence from a sample of 80 countries and nonlinear estimates. Applied Economics 47, 5614-5633. Apergis, N., Payne, J.E., 2011. The renewable energy consumption–growth nexus in Central America. Applied Energy 88, 343–347. Apergis, N. Payne, J.E., 2010. Renewable energy consumption and economic growth: evidence from a panel of OECD countries. Energy Policy 38, 656–660. Apergis, N., Payne, J.E., 2010. Renewable energy consumption and growth in Eurasia. Energy Economics 32 (6), 1392–1397. Apergis, N., Payne, J.E., Menyah, K., Wolde-Rufeal, Y. 2010. On the casual dynamics between emissions, nuclear energy, renewable energy and economic growth. Ecological Economics 69, 2255-2260. Bacak, S., Külcü, S., Ekinci, K., 2009. Türkiye ve AB ülkelerinde yenilenebilir enerji kaynakları politikaları ve hedefler. Journal of Agricultural Machinery Science, 5(1), 9-14. Bakırtaş, İ., Çetin, M.A., 2016. Yenilenebilir enerji tüketimi ile ekonomik büyüme arasındaki ilişki: G-20 ülkeleri. Sosyoekonomi 24(28),131-145. Banerjee, A., J.J. Dolado and R. Mestre (1998): Error-Correction Mechanism Tests for Cointegration in a Single-Equation Framework; Journal of Time Series Analysis 19, 267-283. Banerjee, P., Arčabić, V., & Lee, H. (2017). Fourier ADL cointegration test to approximate smooth breaks with new evidence from Crude Oil Market. Economic Modelling, 67, 114-124. Bayraktar, Y., Kaya, H.İ., 2016. Yenilenebilir enerji politikaları ve rüzgar enerjisi açısından bir karşılaştırma: Çin, Almanya ve Türkiye. Uluslararası Ekonomik Araştırmalar Dergisi 2(4), 1-18. Becker, R., Enders, W. and Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 3(5): 381-409. Bilgili, F., Ozturk, I., Kocak, E., & Bulut, U. (2017). Energy consumption-youth unemployment nexus in Europe: Evidence from panel cointegration and panel causality analyses. International Journal of Energy Economics and Policy, 7(2), 193-201. Blazejczak, J., Braun, F.G., Edler, D., Schill, W.P., 2014. Economic effects of renewable energy expansion: a model-based analysis for Germany. Renewable and Sustainable Energy Reviews 40, 1070–1080. Enders, W., and Lee, J. 2012. “A Unit Root Test Using a Fourier Series to Approximate Smooth Breaks.” Oxford Bulletin of Economics and Statistics 74(4): 574-599. doi:10.1111/j.1468-0084.2011.00662.x. EREC, 2004. Renewable energy target for Europe, Brussels, 2-3. EurObserv’ER, 2016. The state of renewable energies in Europe. Edition 16th EurObserv’ER Report. European Wind Energy Association (EWEA), 2009. Wind Energy The Facts: Executive Summary, http://www.ewea.org/fileadmin/files/library/publications/reports/Wind_at_work.pdf (accessed 31 March 2018). Fang, Y., 2011. Economic welfare impacts from renewable energy consumption: the China Experience. Renewable and Sustainable Energy Reviews 15(9), 5120-5128. Gallant, A. R. 1981. “On the Bias in Flexible Functional Forms and an Essentially Unbiased Form: The Fourier Flexible Form.” Journal of Econometrics 15(2): 211-245. doi:10.1016/0304-4076(81)90115-9. Gallant, A. R., and Souza, G. 1991. “On the Asymptotic Normality of Fourier Flexible Form Estimates.” Journal of Econometrics 50(3): 329-353. doi:10.1016/0304-4076(91)90024-8. George, E. O., & Oseni, J. E. (2012). The relationship between electricity power and unemployment rates in Nigeria. Australian Journal of Business and Management Research, 2(2), 10. Gonzalez, A., Terasvirta, T., Dijk, D., 2005. Panel smooth transition regression models. Working Paper Series in Economics and Finance, 604, Stockholm School of Economics, Stockholm. Global Wind Energy Council (GWEC), 2015. Global Wınd Report. http://gwec.net/publications/global-wind-report-2/global-wind-report-2015-annual-market-update/ (accessed 31 March 2018). Gregory, A. W., & Hansen, B. E. (1996). Residual-based tests for cointegration in models with regime shifts. Journal of econometrics, 70(1), 99-126. Hatemi-j, A. (2008). Tests for cointegration with two unknown regime shifts with an application to financial market integration. Empirical Economics, 35(3), 497-505. Hillebrand, B., Buttermann, H., Behringer, J., Bleuel, M., 2006. The expansion of renewable energies and employment effects in Germany. Energy Policy 34(18), 3484–3494. Ilgar, R., 2005. Ekolojik bakışla jeotermal kaynaklara dualist yaklaşım. Elektronik Sosyal Bilimler Dergisi 4(13), 88-98. The International Energy Agency (IEA), 2009. Global Renewable Energy Policies and Measures 2009. https://www.iea.org/policiesandmeasures/ (accessed 31 March 2018). International Renewable Energy Agency (IRENA), 2015. International Renewable Energy Agency Annual Review. Renewable Energy and Jobs. http://www.irena.org/DocumentDownloads/Publications/IRENA_RE_Jobs_Annual_Review_2015.pdf, (accessed 10 February 2018). Karaca, C., Ulutaş, A., Eşgünoğlu, M., 2017. Türkiye’de optimal yenilenebilir enerji kaynaklarının COPRAS yöntemiyle tespiti ve yenilenebilir enerji yatırımlarının istihdam artırıcı etkisi. Maliye Dergisi, 172: 111-132. Kammen, D.M., Kapadia, K. Fripp, M., 2004. Putting renewables to work: how many jobs can the clean energy industry generate? University of California Berkeley, Report of the Renewable and Appropriate Energy Laboratory. http://rael.berkeley.edu/sites/default/files/very-old-site/renewables.jobs.2006.pdf (accessed 10 February 2018). Lambert R., J. and Silva, P.P. 2012. The challengens of determining the employment effects of renewable energy. Renewable and Sustainable Energy Reviews 16(7), 4667-4674. Ulrike, L., Nitsch, J., Kratzat, M., Lutz, C., Edler, D., 2008. Renewable energy and employment in Germany. Energy Policy 36, 108-117. Lee, Hyejin, Dong-Yop Oh, and Ming Meng. "Stationarity and cointegration of health care expenditure and GDP: evidence from tests with smooth structural shifts." Empirical Economics (2018): 1-22. Lehtovaara, M., Karvonen, M. and Kassi, T., 2013. The role of energy support schemes in renewable energy market penetration. International Journal of Renewable and Sustainable Energy, 2(2), 30-40. Lund, P.D., 2009. Effects of energy policies on industry expansion in renewable energy. Renewable Energy 34, 53–64. Makower, J., Pernick, R., Wilder, C., 2009. Clean Energy Trends 2009, Clean Edge Inc. http://www.cleanedge.com/ reports/pdf/Trends2009.pdf, (accessed 10 February 2018). Markandya, A., Arto, I., González-Eguino, M., Román, M.V., 2016. Towards a green energy economy? Tracking the employment effects of low-carbon technologies in the European Union”. Applied Energy, 179, 1342–1350. Menyah, K., Wolde-Rufael, Y., 2010. CO2 emissions, nuclear energy, renewable energy and economic growth in the US. Energy Policy 38, 2911-2915. Moreno, B., Lopez, A.J., 2008. The effect of renewable energy on employment the case of Asturias (Spain). Renewable and Sustainable Energy Reviews 12(3), 732-751. Martin, N.J., Rice J.L., 2012. Developing renewable energy supply in Queensland, Australia: a study of barriers, targets, policies and actions. Renewable Energy 44,119-127. NREL, 1997. Dollars from sense the economic benefits of renewable energy, national renewable energy labaratory, U.S. department of energy, Washington. OECD, 2004. Environment and Employment: An Assessment”, Working Party on National Environmental Policy, Environment Policy Committee. http://www.oecd.org/dataoecd/13/44/31951962.pdf (accessed 31 March 2018). Orucu, A.Y. Alp, K. 2007. İklim değişikliği sürecinde yenilenebilir enerji kaynakları. Uluslararası Küresel İklim Değişikliği ve Çevresel Etkileri Konferansı, Konya, Türkiye. Özsoy, E.C., 2016. Yeşil İşler ve İstihdam Olanakları Üzerine Bir Tartışma. Aksaray Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 8(1) , 51-59. Öztürk, I. (2010). A literature survey on energy–growth nexus. Energy policy, 38(1), 340-349. Payne, J.E., 2009. On the Dynamics of Energy Consumption and Employment in Illinois. JRAP 39(2):126-130. Perron, P. (1989). The great crash, the oil price shock, and the unit root hypothesis. Econometrica: Journal of the Econometric Society, 1361-1401. Ragwitz, M., Schade, W., Breitschopf, B., Walz, R., Helfrich, N., Rathmann, M., Resch, G., Panzer, C., Faber, T., Haas, R. 2009. The impact of renewable energy policy on economic growth and employment in the European Union. European Commission, DG Energy and Transport, Brussels, Belgium. Robalo, P.B. and Salvado, J.C., 2008. Oil Price Shocks and the Portuguese Economy since the 1970s. FEUNL Working Paper Series 529. http://ideas.repec.org/p/unl/unlfep/wp529.html (accessed 31 March 2018). Rodrigues, P. M., & Robert Taylor, A. M. (2012). The Flexible Fourier Form and Local Generalised Least Squares De‐trended Unit Root Tests. Oxford Bulletin of Economics and Statistics, 74(5), 736-759. Rivers, N., 2013. Renewable energy and unemployment: A general equilibrium analysis. Resource and Energy Economics Journal 35, 467-485. Sadorsky, P., 2009. Renewable energy consumption and income in emerging economies. Energy Policy 37, 4021–4028. Strunz, S., Gawel, E., Lehmann, P., 2016. The political economy of renewable energy policies in Germany and the EU. Utilities Policy 42, 33-41. Tepp, M.,. Schachtschneider, R., Brückmann, R., 2012. The promotion of wind power in Germany and Finland – a comparative overview on legislation, Berlin. UNEP, 2011. Towards a green economy pathways to sustainable development and poverty eradication. Upadhyay, H., Pahuja, N., 2010. Low-carbon employment potential in India: A climate of opportunities" Centre for Global Climate Research TERI and Global Climate Framework Discussion Paper TERI/GCN-1. New Delhi: The Energy and Resources Institute, Global Climate Network. Zhao, X., Luo, D. 2017. Driving force of rising renewable energy in China: environment, regulation and employment. Renewable and Sustainable Energy Reviews, 68, 48-56. Zivot, E., Andrews, D. 1992. Further evidence of great crash, the oil price shock and unit root hypothesis, Journal of Business and Economic Statistics, 10, 251-70.