Productive energy consumption and economic growth: An endogenous growth model and its empirical application

Economic growth rate rises initially with productive energy expenditures but subsequently declines. The hypothetical social planner might set optimal energy intensity. The optimal growth rate is attained at the point where energy expenditure is equal to its competitive market share. When the imperfect competitiveness of the international energy market makes the economy deviate from the optimal state, the role of the government to make the private sector change its energy use pattern becomes important. By the same token, when the world energy market is competitive, the distortionary energy price control by government may harm the economy in the long run.