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Kwilinski, A.; Lyulyov, O.; Pimonenko, T. Inclusive Economic Growth. Encyclopedia. Available online: https://encyclopedia.pub/entry/53723 (accessed on 16 November 2024).
Kwilinski A, Lyulyov O, Pimonenko T. Inclusive Economic Growth. Encyclopedia. Available at: https://encyclopedia.pub/entry/53723. Accessed November 16, 2024.
Kwilinski, Aleksy, Oleksii Lyulyov, Tetyana Pimonenko. "Inclusive Economic Growth" Encyclopedia, https://encyclopedia.pub/entry/53723 (accessed November 16, 2024).
Kwilinski, A., Lyulyov, O., & Pimonenko, T. (2024, January 11). Inclusive Economic Growth. In Encyclopedia. https://encyclopedia.pub/entry/53723
Kwilinski, Aleksy, et al. "Inclusive Economic Growth." Encyclopedia. Web. 11 January, 2024.
Inclusive Economic Growth
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This entry is adapted from the peer-reviewed paper 10.3390/en16062511

The ambitious goal of the European Union (EU) countries is to achieve carbon neutrality by providing inclusive economic growth, which requires the development of relevant incentives and initiatives. Furthermore, such incentives and initiatives should guarantee the achievement of the declared goals. 

sustainable development renewable energy quality of institutions e-Governance digitalization inclusive innovation

1. Introduction

Agenda 2030 declared the ambitious goals to achieve sustainable development around the world. However, one of the core inhibitors in this way is to provide inclusive growth for all countries around the world. A vast range of scientists [1] empirically justified that the economic prosperity of a country is the core driver for reducing inequalities and poverty. However, scholars [2][3] confirmed that economic development does not guarantee the reduction in social, ecological, and economic inequalities. Mostly, it depends on a country’s social, economic, ecological, and political climate, corruption, governance efficiency, etc. In this vein, Luiz, J. M. [3] justified that developing countries with high economic growth have issues with increasing gaps between those who actively participate and are involved in economic processes and those who are not involved. Achieving inclusive economic growth requires simultaneous reduction in inequalities and provision of the economic development of the country. Experts [4][5] from the World Economic Forum [4] and the United Nations Conference on Trade and Development [5] developed an alternative Gross Domestic Product (GDP) to estimate economic development considering the goals of inclusive growth. Reflecting studies [5][6], the inclusive growth index is based on four pillars (economy, living conditions, equality, and environment) that merge 27 indicators. The analytical report [5] showed that developing countries had the lowest level of inclusive growth index. At the same time, developed countries have different levels of inclusive economic growth. The environmental inequalities (affordable energy, access to resources, energy intensity, etc.) are mostly typical of developing countries, and ecological issues (waste, air pollution, etc.) are of developed ones [5][7].
It should be noted that scholars [8][9][10][11][12][13][14][15] confirmed that the energy sector is the core dimension of sustainable and inclusive economic growth. At the same time, it is the core polluter of nature producing the largest volume of carbon dioxide emissions. Furthermore, economic and social benefits from coal energy are less than their negative impact on nature and people’s well-being. Studies [13][15][16] confirmed that providing affordable and clean energy allowed the alignment of ecological disadvantages with social and economic benefits. At the same time, it could not be realized without strong and well-developed institutions [15]. Furthermore, the ongoing trends for penetrating information technologies (IT) at all levels and sectors boost the digitalization of governance and all economic sectors. However, the extension of digitalization could result in the overconsumption of energy resources, which restricts the inclusive economic growth of the country [17][18]. On the other hand, digitalization is conducive to increasing the efficiency of using resources and extending new technologies and renewable energies [19][20]. Those controversial points of view on digitalization and energy require the relevant empirical justification to develop appropriate mechanisms for achieving inclusive economic growth.

2. Inclusive Economic Growth

The analysis of the theoretical framework showed that inclusive economic growth is examined from various points of view, including social inequalities, gender disparities, resource inequalities, income disparities, and well-being. The study [6] used the concept of the World Economic Forum on inclusive economic development, which was based on studying 12 indicators that merged into three groups. Scholars [21] applied the methodology of the United Nations Conference on Trade and Development [5] to estimate inclusive economic growth for East Java for 2011–2014. Considering the findings, the scholars confirmed that countries based on agriculture, fishing, and forestry have lower levels of inclusive economic growth than countries with powerful industrial and trade sectors. Specifically, they concluded that economic prosperity (capabilities to generate GDP) is a core driver of inclusive economic growth.
Prior studies [22][23] defined inclusive economic growth as development that is based on social participation (through providing workplaces, public safety, and social infrastructure) and aims at achieving a balance between economic growth and environmental degradation. Rini and Tambunan [24] defined that inclusive economic growth depends on a vast range of factors: income inequality, quality of human resources, environmental degradation, social development, level of poverty, and industrialization. Scholars have applied a fixed effect model to define significant indicators of inclusive economic growth for Indonesian provinces. Considering the findings, they concluded that the share of households that own computers and the share of households that use liquefied petroleum gas (LPG) as fuel for cooking significantly affect Indonesian inclusive economic growth. The study [25] developed a composite indicator for estimating inclusive economic growth in India for 2001–2011. The proposed index contains six groups of indicators (Economic, Amenities, Sustainability, Gender and Financial inclusion, Human Development, and Governance) that merge 19 sub-indicators. Based on summarizing the approach for estimating inclusive economic growth, Chaikin and Usiuk [26] defined inclusive economic growth as the available human resources for being involved in effective economic activities and providing better living conditions and well-being. In particular, scholars [26] have emphasized that inclusive economic growth depends on income, poverty, quality of life, and gaps between the poor and the rich. Studies [7][27][28] suggested analyzing inclusive economic growth under the reduction in poverty and pro-poor development. McMullen [7] and Collier [28] underlined that more than 5 billion people living in poverty live in developing countries. McMullen [7] maintained that entrepreneurship development could be the way to decline poverty and, consequently, achieve inclusive economic growth. A similar conclusion was obtained in previous studies [29][30][31][32][33][34]. However, in contrast to [7], the latter considers the ecological dimensions. Kitagawa and Vidmar [35] analyzed inclusive growth in the framework of the sustainable development concept. They developed an innovative approach based on the Opportunity Areas Analysis Tool to measure the inclusive growth of the City Region Deal in Scotland (the United Kingdom). Based on the findings, they formulated recommendations for declining gaps between rural, semirural, and urban regions. Kitagawa and Vidmar [35] analyzed inclusive economic growth in view of geographical dimensions. Ali and Zhuang [36] indicated that effective inclusive economic growth should be based on two core goals of sustainable development: (1) developing options for appropriate and affordable conditions for employment and (2) social integration–providing equal access to capabilities for everyone. A previous study [37] underlined the trilemma connections between education, income, and poverty for providing inclusive economic growth. The researchers analyzed Asian developing countries in the period 1990–2016. Based on the empirical results, they concluded that education could reduce poverty if it was estimated due to poverty gaps and the coefficient of poverty, declining unemployment, and an increasing ratio of GDP to poverty reduction. The study [38] highlighted the effect of transport infrastructure on inclusive economic growth in China. The scholars confirmed that railways positively impact inclusive economic growth by providing a less negative impact on nature. Prior studies [39][40] have analyzed inclusive economic growth in the framework of declining gender inequalities. In this case, they defined the following dimensions of inclusive economic growth: fertility; female labor force; access of women to education; and women in the democratic system. Applying a Two-Stage Least Square model, the study [41] shows that household consumption, exports, and foreign direct investment positively affect inclusive economic growth in Indonesia. Similar conclusions are made by Awad-Warrad and Muhtaseb [42]. Based on the results of an OLS model, they empirically justify the positive effect of export and foreign direct investment on inclusive economic growth.

3. Inclusive Economic Growth & Affordable and Clean Energy

Scholars [8][14] have confirmed that the efficiency of the energy sector is the crucial dimension for inclusive economic growth. In [8], the researchers justified the necessity to unify energy regulation and provide innovation and green technologies in the energy sector. Based on empirical results, scientists [14] concluded that the Association of Southeast Asian Nations (ASEAN) countries should invest in green energy, which decreases disparities in access to energy resources. The growth of renewable energy allows reducing carbon dioxide emissions by 0.46%, which is the core dimension of inclusive economic growth. In addition, a relevant education program should be provided to enhance green consciousness and awareness. Consequently, it allows for reducing energy poverty and providing affordable clean energy for everyone, diminishing energy dependence and natural degradation, including decreasing air pollution [15][16][43]. In addition, the study [44] highlighted that affordable clean energy for households is the crucial dimension for declining gaps in life quality. The positive relationships between affordable energy and inclusive growth were confirmed by the study [45]. The researchers analyzed five Asian countries (India, Pakistan, Bangladesh, Sri Lanka, and Nepal) for the period of 1971–2010 and applied Pedroni’s panel cointegration test to confirm the long-run relationship between renewable energies and a country’s inclusive economic growth. Based on the results, the scholars [45] emphasized that affordable and clean energy allows reducing energy dependences and air pollution in India. Lee et al. [46] indicated that snowballing economic growth in Asian countries reduced poverty and improved the well-being of the people. However, the rapid growth led to overconsumption of energy resources and inequalities in access to energy recourses and clean nature. Thus, the scholars concluded that extending renewable energies, integration of energy infrastructures and markets, and intensification of research in alternative energy and green technologies allow for achieving inclusive economic growth in Asian countries. Prior studies [47][48] highlighted the energy consumption structure’s effect on inclusive economic growth. Phung et al. [49] confirm that restructuring of country’s energy balance due to increasing the share of renewable energies could promote inclusive economic growth. Anyway, foreign direct investment is conducive to renewable energy extension.

4. Inclusive Economic Growth & Governance Efficiency

The quality of government institutions has a priority role in the achievement of inclusive economic growth [47][50][51][52][53][54]. Thus, the institutional climate could enforce or restrict inclusive economic growth. Proceeding from the results of analyzing the theoretical framework of inclusive growth, Baud [52] emphasized that hybrid governance mechanisms could boost inclusive economic growth. In addition, all stakeholders should be involved in governance and in making strategic decisions. Brooks and Fairfull [55] theoretically justified that interactive governance theory was conducive to inclusive economic growth. They highlighted that it allows the achievement of the long-run goals of inclusive economic growth. Asongu and Odhiambo [56] analyzed sub-Saharan African countries for the period of 2000–2012 and applied the generalized method of moments (GMM) techniques. Considering the results of the analysis, they confirmed that effective governance (which is estimated by the World Governance Indicators from the World Data Bank) positively affects inclusive economic growth by reducing corruption and increasing transparency and political stability. The study [57] argued that the quality of institutions could promote inclusive economic growth and reduce social disparities and gaps. As indicators of institutional qualities, scholars [57] used the World Government Indicators. They found that voice and accountability, the rule of law, and corruption had a direct impact on the efficiency of social institutions. Efficacy of last positive effects on decreasing disparities and inequalities. The scholars [58] compared performance in achieving inclusive economic growth between China and India. Considering the results of the comparison, they confirmed that democracy, voice and accountability, and corruption could promote inclusive economic growth. In this case, the rapid economic growth in China and India (the countries with high levels of corruption, low levels of transparency, etc.) does not stimulate inclusive economic growth. In addition, the scholars emphasized the crucial role of social institution development and governance quality in providing inclusive economic growth [58]. Mangena [59] argued that bad governance and corruption were the core inhibitors of inclusive economic growth. In addition, corruption and shadow economies limit the effective development of renewable energies and consequently slow the achievement of inclusive economic growth [48].

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