Essays in Applied Economics

This thesis proposes the application of various economic theories and analytical techniques from the fields of energy economics, environmental economics, comparative economic systems and, development economics in the regional context of South and Central Asia. Applying IV estimation in essay one leads to the conclusion that ethnolinguistic diversity instrumented by diversity of ancient civilizations/empires is strongly linked with contemporary development in Afghanistan. Ethnolinguistic diversity induces higher levels of trust and lower levels of individualism. Moreover, it is associated with higher levels of income and lower levels of violence or crime. A robust regression discontinuity design has been used to estimate the impact of historical ethnolinguistic borders on the contemporary economic development of Afghanistan. Pashtuns have the clear advantage over the other ethnolinguistic groups in Afghanistan in terms of level of income and provision of public goods such as safe drinking water and electricity. The Pashtun belt has suffered more violence and crime due to foreign interference in the Pashtun areas. The ethnolinguistic division in Afghanistan in terms of political preferences is obvious by the fact that support for Ashraf Ghani declines significantly when crossing the ethnic and linguistic border into the non-Pashtun areas. Structural equation modeling results reveal that the empires of Achaemenids, Parthians, and, most prominently, Sasanians, categorized as Old Persian, and the empires of Turkic origin left a positive and persistent impact on the contemporary economic development of Afghanistan. Essay 2 and essay 3 of the dissertation deal with the economics of electricity and sustainable energy. Electricity generation from the use of fossil fuels is one of the largest sources of man-made carbon dioxide emissions in the world. Switching the power industry to the use of renewables such as hydro, solar, and wind energy is an option to deal with the issue of climate change. There are various challenges confronting the world and particularly South Asia in this energy transition towards renewable energy resources. Therefore, there is a necessity to take policy measures that enable electric utilities operating on fossil fuels to reach a technically efficient point where considerable savings in terms of costs and carbon emissions can be made. This has been estimated in the case of Pakistan in essay 2, with a possible reduction of about 34% of carbon emissions and 26% of the cost of power generation from fossil fuels with the use of technically efficient inputs. In essay 3, this thesis explores factors that are impediments to growth of the renewable energy sector by using pooled mean group autoregressive distributed lag (PMG ARDL) and the time series autoregressive distributed lag model, as well as by using the analytical tool of SWOT methodology to identify the strengths, weaknesses, opportunities, and threats in relation to the internal and external environment of development of the renewable energy sector in South Asia. Empirical results suggest that poor economic growth and the depreciating exchange rate are the major barriers to the development of the renewable energy sector of South Asia. SWOT analysis suggests that credit institutions’ lack of interest in financing for renewable energy projects, the poor financial situation of the distribution companies, and inadequate research in the sustainable energy sector are the main obstacles to this development.