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How does increased electricity supply and usage affect economic growth?


Increased electricity supply can contribute to economic growth. Electricity supply can be boosted by:
  • Reducing production costs.
  • Enabling economic activities.
  • Increasing investment and/or,
  • Improving agricultural and industrial productivity.
While the channels are well understood, evidence on the causal link from increased electricity consumption to economic growth is inconclusive. Greater electricity consumption can contribute to growth, but growth also increases demand for electricity. An important question, when considering whether to prioritise electrification is the effectiveness of this approach in comparison to other measures to boost growth. On this question, electricity supply, access and reliability should be prioritised if it is a key binding constraint on growth.

Image credits: Premasagar / Flickr

A survey of the electricity consumption-growth literature
J.E. Payne / Elsevier 2010
This study discusses the various hypotheses associated with the causal relationship between electricity consumption and economic growth along with a survey of the empirical literature. The survey focuses on country coverage, variables...
Electricity consumption and real GDP causality nexus: Evidence from ARDL bounds testing approach for 11 MENA countries
I. Ozturka; A. Acaravci / Elsevier 2011
This paper investigates the short-run and long-run causality issues between electricity consumption and economic growth in the selected 11 Middle East and North Africa (MENA) countries by using Autoregressive Distributed Lag (ARDL) bo...
Current debates on infrastructure policy
A. Estache; M. Fay / World Bank 2007
This paper is a product of the Poverty Reduction and Economic Management (PREM) Vice-Presidency. It provides an overview of the major current debates on infrastructure policy and reviews the evidence on the significance of the sector ...
Integrating Energy Access and Employment Creation to Accelerate Progress on the Millennium Development Goals in Sub-Saharan Africa
United Nations Development Programme 2012
This report from the United Nations Development Programme was published during the ‘International Year of Sustainable Energy For All,’ as voted by the UN General Assembly. It seeks to demonstrate the benefits of complement...