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Energy distribution and economic growth

  • Dalgaard, Carl-Johan
  • Strulik, Holger

This research examines the physical constraints on the growth process. In order to run, maintain and build capital energy is required to be distributed to geographically dispersed sites where investments are deemed profitable. We capture this aspect of physical reality by a network theory of electricity distribution. The model leads to a supply relation according to which feasible electricity consumption per capita rises with the size of the economy, as measured by capital per capita. Specifically, the relation is a simple power law with an exponent assigned to capital that is bounded between 1/2 and 3/4, depending on the efficiency of the network. Together with an energy conservation equation, capturing instantaneous aggregate demand for electricity, we are able to provide a metabolic-energetic founded law of motion for capital per capita that is mathematically isomorphic to the one emanating from the Solow growth model. Using data for the 50 US states 1960–2000, we examine the determination of growth in electricity consumption per capita and test the model structurally. The model fits the data well. The exponent in the power law connecting capital and electricity is 2/3.

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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 4 ()
Pages: 782-797

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Handle: RePEc:eee:resene:v:33:y:2011:i:4:p:782-797
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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