Economic growth and electricity consumption

Abstract

Do countries consume more electricity as they become richer? This study uses an instrumental variables approach to investigate the connection between electricity consumption and economic growth. With panel data of 32 countries spanning the period of 1996-2014, two potential instruments, which are an oil price shock as the main focus and past saving rates, are used for estimation. Controlling for country and time-fixed effects, the estimation results show no evidence of unidirectional causality runs from national income to electricity consumption.