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Is the electricity sector a weak link in development?

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  • Colmer, Jonathan
  • Lagakos, David
  • Shu, Martin

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

  • Colmer, Jonathan & Lagakos, David & Shu, Martin, 2024. "Is the electricity sector a weak link in development?," LSE Research Online Documents on Economics 126817, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:126817
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    File URL: http://eprints.lse.ac.uk/126817/
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Fernandes, Bernardo de Barros & Ferreira, Pedro Cavalcanti, 2025. "The network origins of carbon pricing regressivity," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 845, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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    More about this item

    Keywords

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

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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