Industrialization in Developing Economies: The Role of Renewable Energy Consumption, Natural Resources, Foreign Direct Investment, Trade, and Human Capital - Evidence from Panel ARDL
DOI:
https://doi.org/10.47067/ramss.v9i1.638Keywords:
Industrialization, Renewable Energy Consumption, Trade, Foreign Direct Investment, Panel ARDL, Developing CountriesAbstract
The paper explores the factors that affect industrialization in the developing economies through the consumption of renewable energy, use of natural resources, foreign direct investment, openness to trade, and human capital. Based on a balanced panel dataset of 40 countries (1995-2024) the study uses panel unit root tests, Pedroni and Kao cointegration methods, and panel Autoregressive Distributed Lag (ARDL) model to estimate the short-run and long-run relationships. The unit root findings affirm mixed integration orders of variables, whereas cointegration tests indicate that there is a long-run equilibrium relationship. The long-run results suggest that consumption of renewable energy, natural resources, openness to trade, foreign direct investment, and human capital have a significant and positive impact on industrialization. Nonetheless, there are mixed effects on short-run performance with renewable energy and foreign direct investment having non-significant effects whereas natural resources and trade have a positive contribution on industrialization. The error correction term is negative, and it is large which proves convergence to the long-run equilibrium. The results of these findings emphasize the role of sustainable energy transition, proper management of resources, liberalization of trade, and development of human capital in fostering industrialization. The article recommends that the developing economies need to implement integrated industrial policies that promote the use of green energy, foreign investment, trade openness and education investment as a way of realizing sustainable industrial growth.
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