Correlation and causation between energy development and economic growth

This study summaries literature that analyses the relationship between electricity access and availability and economic growth

Abstract

This study summarises current economic literature that attempts to analyse the relationship between electricity access/availability and economic growth. According to the extensive literature review that was conducted for this purpose, there is a strong causal relationship between the two variables, but there is no consensus regarding the direction of the causality. There is also inconclusive evidence on the impact of higher availability of modern energy services on poverty reduction and income equality.

The study also explores how energy policies have contributed to the development of the energy and economic growth. Deregulation, energy conservation and clean energy policies such as energy efficiency and renewable energy were found to have a positive macroeconomic impact, while according to the literature, energy subsidies are likely to cause fiscal imbalances and discourage investment in the energy sector.

This report has been produced by Economic Consulting Associates for Evidence on Demand with the assistance of the UK Department for International Development (DFID) contracted through the Climate, Environment, Infrastructure and Livelihoods Professional Evidence and Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by HTSPE Limited and IMC Worldwide Limited.

Citation

Economic Consulting Associates. Correlation and causation between energy development and economic growth. Evidence on Demand, UK (2014) 32 pp. [DOI: http://dx.doi.org/10.12774/eod_hd.january2014.eca]

Correlation and causation between energy development and economic growth

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