Energy Consumption and Economic Growth Nexus in East African Sub-Region: Interactive Dynamics of Human Capital

Abstract

Human capital is an essential for economic growth and energy consumption. Skills, knowledge, and population health drive innovation and energy utilization. Understanding these factors is vital for addressing contemporary energy challenges and fostering economic development. Therefore, this study focuses on the East African sub-region from 2012 to 2021, exploring how education and health, as proxies for human capital, influence the energy-economic growth nexus. We employed various analytical methods, including Pooled Ordinary Least Squares, Fixed Effects, and the Generalized Method of Moments. Our findings highlight the importance of historical context in shaping present growth policies, as there is a positive association between current and past economic performance. Additionally, higher energy prices negatively affect economic growth, underlining the need for energy price stability. Further, energy consumption appears to negatively impact economic growth. However, when considering life expectancy as a proxy for human capital, this relationship reverses. Improved life expectancy becomes pivotal in shaping energy-growth policies. Our study underscores the critical importance of enhancing life expectancy, maintaining energy price stability, and strategically investing in energy consumption for stable economic growth in East Africa.