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Electricity consumption and economic growth: A cross-country analysis

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  • Yoo, Seung-Hoon
  • Lee, Joo-Suk
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    Abstract

    Electricity has been the foundation of economic growth, and constitutes one of the vital infra-structural inputs in socio-economic development. The world faces a surge in demand for electricity that is driven by such powerful forces as population growth, extensive urbanization, industrialization, and the rise in the standard of living. This paper attempts to ascertain whether there is a systematic relationship between electricity consumption and economic growth. To this end, we use a large set of data that spans 88 countries during the period, 1975-2004. A statistically significant inverted-U-shaped relationship between per-capita consumption of electricity and per-capita income is detected. Nevertheless, by using a purchasing power parity that is much higher than the per-capita income of all the countries in the world, the level of per-capita income is estimated at the peak point of per-capita electricity consumption to be $61,379 in 2000 constant international dollars. Moreover, we segment the sample into Organization for Economic Cooperation and Development (OECD) countries and non-OECD countries, and separately analyze the developed and developing countries. The separate estimation shows that even though the peak income is higher than the average per-capita income, a statistically significant inverted-U-shaped relationship is found in OECD and developed countries but not in non-OECD and developing countries.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 38 (2010)
    Issue (Month): 1 (January)
    Pages: 622-625

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    Handle: RePEc:eee:enepol:v:38:y:2010:i:1:p:622-625

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    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Electricity Economic growth Panel analysis;

    References

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    1. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.
    2. Matthew Cole, 2004. "Economic growth and water use," Applied Economics Letters, Taylor & Francis Journals, vol. 11(1), pages 1-4.
    3. Cole, M.A. & Rayner, A.J. & Bates, J.M., 1997. "The environmental Kuznets curve: an empirical analysis," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 401-416, November.
    4. World Bank, 2007. "World Development Indicators 2007," World Bank Publications, The World Bank, number 8150, July.
    5. Nathan Rosenberg, 1998. "The Role of Electricity in Industrial Development," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 7-24.
    6. Yoo, S.-H., 2006. "The causal relationship between electricity consumption and economic growth in the ASEAN countries," Energy Policy, Elsevier, vol. 34(18), pages 3573-3582, December.
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    Cited by:
    1. Shahbaz, Muhammad & Jalil, Abdul & Dube, Smile, 2010. "Environmental Kuznets curve (EKC): Times series evidence from Portugal," MPRA Paper 27443, University Library of Munich, Germany.
    2. Gurgul, Henryk & Lach, Łukasz, 2012. "The electricity consumption versus economic growth of the Polish economy," MPRA Paper 52233, University Library of Munich, Germany.
    3. Shahateet, Mohammed, 2014. "Modeling Economic Growth and Energy Consumption in Arab Countries: Cointegration and Causality Analysis," MPRA Paper 57304, University Library of Munich, Germany.
    4. Phetkeo Poumanyvong & Shinji Kaneko & Shobhakar Dhakal, 2012. "Impacts of urbanization on national residential energy use and CO2 emissions: Evidence from low-, middle- and high-income countries," IDEC DP2 Series 2-5, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    5. Richard Cebula, 2012. "Recent evidence on determinants of per residential customer electricity consumption in the U.S.: 2001-2005," Journal of Economics and Finance, Springer, vol. 36(4), pages 925-936, October.
    6. Paul, Biru Paksha & Uddin, Gazi Salah, 2011. "Energy and output dynamics in Bangladesh," Energy Economics, Elsevier, vol. 33(3), pages 480-487, May.
    7. Muhammad Shahbaz & Mete Feridun, 2012. "Electricity consumption and economic growth empirical evidence from Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 46(5), pages 1583-1599, August.
    8. Becker, Bastian & Fischer, Doris, 2013. "Promoting renewable electricity generation in emerging economies," Energy Policy, Elsevier, vol. 56(C), pages 446-455.
    9. Lee, Chien-Chiang & Chiu, Yi-Bin, 2011. "Oil prices, nuclear energy consumption, and economic growth: New evidence using a heterogeneous panel analysis," Energy Policy, Elsevier, vol. 39(4), pages 2111-2120, April.

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