energy efficiency

green

Socio-economic Planning Sciences

Several studies have studied the determinants of energy efficiency. However, the influence of government institutions was mostly ignored as only few studies have provided evidence on the role of institutions in enhancing domestic energy efficiency. In this paper, we extend the previous literature by asking whether neighboring country's institutions could also have an impact on domestic energy efficiency. Thus, with the stochastic frontier approach and spatial econometric model, we investigate the spatial effect of institutional quality on energy efficiency in a panel of 99 countries (economies) for the period 1995–2016. Our results, first confirm the presence of spatial correlations in energy efficiency across countries. Secondly, we discover that the direct positive effect of institutional quality on energy efficiency is such that it overcomes the insignificant indirect negative effect, which suggests a total positive and significant effect. Our results, therefore, indicate that institutional quality matters in energy efficiency improvement and being close to countries with good institutional framework has a positive effect on domestic energy efficiency. Finally, the energy efficiency estimates demonstrate that global energy issue can only be addressed with long-term policies that increases technological progress. • We examine the spillover effects government institutions on energy efficiency. • We adopt the stochastic frontier approach and spatial econometric model. • The result confirms the presence of spatial correlations in energy efficiency across countries. • Being close to countries with good institutions has a positive effect on energy efficiency. • Long-term policies with increased technological progress can address energy issue.

Institutional quality and its spatial spillover effects on energy efficiency