The Correlation between Energy Cost Share, Human, and Economic Development: Using Time Series Data from Australasia, Europe, North America, and the BRICS Nations

This paper investigates how a change in a region’s energy cost share (ECS), a ratio of a region’s energy expenditure as a fraction of its gross domestic product (GDP), affects the region’s social and economic development. Nations from four regions of the world, namely Australasia, Europe, North America, and the BRICS nations (Brazil, Russia, India, China, and South Africa) were chosen for this study. Using time series data from the period of 1978 to 2010, the annual ECS of each country was compared to the year-on-year GDP change, as well as the components of the human development index (HDI). High ECS values were seen to correlate with low economic development. The existence of an ECS threshold was found in 14 of the 15 countries, for all the regions, and for the worldwide analysis, with very strong correlation coefficients obtained for periods of high ECS. New to this field of research, this study also investigated the effects of ECS on gross national income (GNI) per capita change, as well as the effects of 0, 1, 2, and 3 year lags. This investigation found that ECS has a very strong correlation to GNI per capita change, which was much stronger than the correlation between ECS and GDP change. The effects of ECS on social and economic development occurred after varying time lags, and it is unique to each country and region. Regions with similar ECS dynamics were identified, with possible reasons for the similarities being provided