Renewable energy: An efficient mechanism to improve GDP

Taichen Chien*, Jin-Li Hu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

81 Scopus citations


This article analyzes the effects of renewable energy on GDP for 116 economies in 2003 through Structural Equation Modeling (SEM) approach. In order to decipher the mechanism of how the use of renewables improves macroeconomic efficiency, we decompose GDP by the "expenditure approach". Although previous theory predicts positive effects of renewables on capital formation and trade balance, the SEM results show that renewables have a significant positive influence on capital formation only. The result that renewables do not have a significant impact on trade balance implies that renewables do not have an import substitution effect. Thus, we confirm the positive relationship between renewable energy and GDP through the path of increasing capital formation, but not for the path of increasing trade balance.

Original languageEnglish
Pages (from-to)3035-3042
Number of pages8
JournalEnergy Policy
Issue number8
StatePublished - 1 Aug 2008


  • Renewable energy
  • Structural Equation Modeling (SEM)
  • Technical efficiency

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