Panel data models for the analysis of the relationship between total factor productivity and energy consumption in OECD countries

Productivity increases make it possible to achieve and sustain economic growth. Policies to improve productivity have become a critical issue for national economies as globalization has increased international competition. The relationships between TFP and selected determinants of 35 OECD countries are investigated in this study, which includes the years 2002-2019. In this direction, heterogeneous panel data model analysis methods are applied to test possible relationships between TFP and GDP, foreign direct investments, energy imports, energy consumption, and renewable energy consumption variables. Furthermore, TFP for OECD countries is calculated using the pooled least squares method. A positive and significant relationship was observed between total factor productivity and the variables of GDP and foreign direct investments, according to the results of the heterogeneous model with the constant parameter used in the analysis. The energy import variable and TFP were found to have no significant relationship. According to the findings of the analysis, the explanatory variables of energy consumption and renewable energy consumption had a quadratic relationship with TFP. While primary energy consumption reduces TFP after a certain level of consumption, renewable energy consumption increases TFP after a certain level of consumption. In general, it has been determined that OECD countries' energy consumption is at a level that reduces TFP, whereas renewable energy consumption is below the level that increases TFP in the majority of the countries studied. According to this study, which investigates the relationship between TFP and energy, increasing renewable energy consumption could increase TFP while also ensuring sustainable economic growth. Keywords: Total Factor Productivity, Energy, Economic Growth, Pooled Least Squares, Heterogeneous Panel Data.