The Effect of Economic Complexity on Energy Consumption in the Industrial Sector

Abstract

The relationship between technology and energy consumption is one of the most challenging issues in the field of energy policy. Various studies have investigated this relationship but did not come up with the same results. In this paper, using the economic complexity index, this relationship is evaluated for energy consumption in the industrial sector of Iran for the period 1971-2016. The findings show that the increasing complexity of the economy has led to an increase in energy consumption in the industrial sector, which can be due to two reasons: first, the rebound effects of technology, and second, the transfer of production to the industrial sector due to the change in the structure of production towards technological goods. On the other hand, as regards the cross-effects, economic complexity has reduced the positive coefficient of income, which indicates that with higher technology, increase in production, will increase energy consumption to a lesser extent. Consequently, from this perspective, economic complexity can lead to positive results in energy consumption in the industrial sector.

Keywords

• economic complexity
• improvement of technology
• energy consumption
• rebound effects
• industrial sector.