An analysis on the relationship between energy consumption and unemployment in G20 countries

Energy is an element that is used as a basic input in production, affects the welfare levels of societies and is used in all areas of life. Energy is divided into two: renewable and non-renewable resources. Non-renewable resources are energy sources that are limited in nature and take many years to regenerate. It generally consists of fossil fuels such as coal, oil and natural gas. Renewable energy source is an energy source that exists naturally in nature and is constantly renewed. It consists of sources such as sun and wind. There are different types of unemployment such as structural, hidden and technological. Unemployment is generally an undesirable situation in economies. Therefore, policy makers want unemployment to be as low as possible. As economies grow, unemployment is expected to decrease. Since energy is used in all production processes and the majority of consumption activities, it is thought that there is a causal relationship between economic activities and energy consumption. There is a feedback mechanism between energy consumption and economic growth. As economic growth increases, energy consumption increases. With the increase in economic growth, production, investment and consumption will increase. Therefore, more energy is needed. With the increase in energy, the increase in the production of goods and services will increase total demand. Increases in demand will lead to increased economic growth and thus unemployment will decrease. For this thesis, the Driscoll-Kraay method was tested for the period 1980-2016 of selected G20 countries in order to examine the effect of energy consumption on unemployment. As a result of the analysis, it was seen that a one percent increase in energy consumption had a reducing effect of 0.77 on unemployment. Keywords: Energy consumption, Unemployment, G20, Driscoll-Kraay Method