Electricity consumption and economic growth: evidence from Pakistan

Abstract

The prime objective of this study is to examine the long run relationship between real GDP per capita and electricity consumption for Pakistan over the period 1971 to 2008. The results reveal that there is unidirectional causality from electricity consumption to real GDP per capita. The findings of the study also show that there is long run relationship between real GDP per capita and electricity consumption. The unidirectional causality running from electricity consumption to economic growth indicate that electricity is a limiting factor to economic growth and hence, shocks to electricity supply will have a negative impact on economic growth. The implication emerges from this study is that for electricity deficient country like Pakistan where electricity sector operates at bare capacity margin, there is need of planning and investment in infrastructure development to fulfill increased electricity demand.