THE RELATIONS BETWEEN ENERGY EFFICIENCY AND GDP IN THE BALTIC SEA REGION AND NON-BALTIC SEA REGION

This study employs the data envelopment analysis (DEA) approach, with a single output (real GDP) and three inputs (labour, real capital stock, and energy consumption) to estimate the total factor energy efficiency (TFEE) of 27 EU countries: 8 in the Baltic Sea region and 19 in the non-Baltic Sea region. We find that there are an upward slope and increasing as well as an upward slope and decreasing relations between the TFEE and real GDP per capita in the Baltic Sea and non-Baltic Sea regions, respectively. This finding is very different from the past study that concluded a U-shaped relation between the TFEE and real GDP per capita and indicates that energy efficiency improvement does not hinder the GDP growth in the EU.