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Is the Electricity Sector a Weak Link in Development?

Author

Listed:
  • Jonathan Colmer
  • David Lagakos
  • Martin Shu

Abstract

This paper asks whether increasing productivity in the electricity sector can yield larger long-run GDP gains than suggested by electricity’s small share of aggregate economic activity. We answer this question using a dynamic model in which electricity is a strong complement to other inputs in production. We parameterize the model using our own new measures of electricity-sector TFP across countries. The model predicts modest long-run GDP gains from improving electricity-sector TFP, contrary to the notion that electricity is a weak link. Parameterizations that make electricity a weak link mostly require the electricity sector to be counterfactually large or unproductive.

Suggested Citation

  • Jonathan Colmer & David Lagakos & Martin Shu, 2023. "Is the Electricity Sector a Weak Link in Development?," CESifo Working Paper Series 10874, CESifo.
    • Handle: RePEc:ces:ceswps:_10874
    as

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    References listed on IDEAS

    as
    1. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    2. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    3. Restuccia, Diego & Yang, Dennis Tao & Zhu, Xiaodong, 2008. "Agriculture and aggregate productivity: A quantitative cross-country analysis," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 234-250, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    electricity; economic development; weak link; TFP;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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