Energy Diversification and Its Determinants: Evidence from Developed and Developing Countries

This study pioneers empirical studies on the economic and demographic determinants of energy diversification using a recently constructed energy diversification index. With a dataset of 65 countries involving panels of middle-income, high-income, and G20 countries, factors such as income level, urbanization, foreign direct investment, infrastructure, and industrialization were analyzed using several econometrics techniques including the Driscoll-Kraay standard errors, a generalized method of moments approach, and a panel data quantile regression approach. The results suggest that in most cases, rising income and urbanization enhance energy diversification, especially at higher quantiles. Furthermore, more foreign direct investment leads to less energy diversification, except in middle-income countries. The results also imply that more infrastructural facilities and industrialization lead to more diversification in high-income countries.