What is it about?
The purpose of this study is to determine the relationship between electric power consumption and economic growth in Peru between 1971 and2014. The four theoretical hypotheses behind this relationship are the growth hypothesis (electricity consumption explains economic growth), the conservation hypothesis (economic growth explains electricity consumption), the feedback hypothesis (mutually affecting explanation between electricity consumption and economic growth), and neutrality hypothesis (electricity consumption does not explain economic growth and vice versa). Empirically, we initially conclude that the conservation hypothesis can be confirmed using the Granger Causality test, after estimating the dynamic impacts of the long-run equilibrium and short-run models. We highlight the inelastic behavior of electric power consumption per capita with regard to real GDP per capita.
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Why is it important?
Our results have implications for electricity conservation, expansive and security policies. We also discussed investments in electricity generation, transmission and distribution from renewable energy sources such as hydro, wind and solar. These eco-sustainable energies also called green and clean energies, are necessary for the sustainability of the electric power demand and the level of national electrification.
Perspectives
We consider pertinent to evaluate the identification of some additional independent variable through an omitted variable test as an extension of the present research to avoid the possible misspecification bias of the econometric model. Future research can include carbon dioxide emissions or total employment as the third variable. Also is possible including three additional variables in the model: petroleum consumption, foreign direct investment per capita and the rate of urbanization. Future research might benefit from including these variables in future specifications.
Professor Ciro Eduardo Bazán Navarro
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This page is a summary of: Does economic growth promote electric power consumption? Implications for electricity conservation, expansive, and security policies, The Electricity Journal, January 2023, Elsevier,
DOI: 10.1016/j.tej.2023.107235.
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