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The Economy Wide Impact of Investment on Infrastructure for Electricity in Ethiopia: A Recursive Dynamic Computable General Equilibrium Approach

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  • Dinkneh Gebre Borojo

    (Department of Economics, Adama Science and Technology University, Adama, Ethiopia)

Abstract

This study has applied a recursive dynamic computable general equilibrium model to examine the economic impact of investment on infrastructure for electricity using an updated 2009/10 social accounting matrix. Three simulations (foreign saving, domestic household and enterprises saving and mix of foreign and domestic saving to finance the investment) in combination with total factor productivity of industrial and service sectors are used. The findings of the study have shown the improvement of the real gross domestic product (GDP), output of industrial and service sectors in all simulations. Nonetheless, mixed effects have found on household consumption and trade balance. The highest growth of real GDP is registered when the investment on electricity is fully financed by domestic household and enterprise saving. However, household consumption expenditure has grown at negative rate worsening the welfare of households. Investment on electricity fully financed by foreign saving is resulted in lower growth rate of real GDP due to worsening of net export. In addition, it has benefits for households as it increases their welfare. But it is to be repaid in the future that would increase indebtedness of the country. So, financing the investment partly by domestic household saving and foreign saving would be worthwhile.

Suggested Citation

  • Dinkneh Gebre Borojo, 2015. "The Economy Wide Impact of Investment on Infrastructure for Electricity in Ethiopia: A Recursive Dynamic Computable General Equilibrium Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 986-997.
    • Handle: RePEc:eco:journ2:2015-04-10
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    References listed on IDEAS

    as
    1. Yazid Dissou & Selma Didic, 2011. "Public Infrastructure and Economic Growth A Dynamic General Equilibrium Analysis with Heterogeneous Agents," EcoMod2011 3368, EcoMod.
    2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    3. Johannes Fedderke & Charles Simkins, 2012. "Economic Growth in South Africa," Economic History of Developing Regions, Taylor & Francis Journals, vol. 27(1), pages 176-208.
    4. Arbex, Marcelo & Perobelli, Fernando S., 2010. "Solow meets Leontief: Economic growth and energy consumption," Energy Economics, Elsevier, vol. 32(1), pages 43-53, January.
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    Cited by:

    1. Cicowiez, Martin & Akinyemi, Opeyemi & Sesan, Temilade & Adu, Omobola & Sokeye, Babajide, 2022. "Gender-differentiated impacts of a Rural Electrification Policy in Nigeria," Energy Policy, Elsevier, vol. 162(C).
    2. E. T. Adamgbe & M. C. Belonwu & E. R. Ochu & I. I. Okafor, 2020. "Analysis of the Impact of Central Bank of Nigeria's Agricultural Intervention Funds on the Economy," Economic and Financial Review, Central Bank of Nigeria, vol. 58(1), March.

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    More about this item

    Keywords

    Electricity Infrastructure; Economy; Recursive Dynamic Computable General Equilibrium Model;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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