The Impact of Electricity on Economic Development: A Macroeconomic Perspective

Stern, David I.; Burke, Paul J.; Bruns, Stephan B.

doi:10.1561/101.00000101

Cited by 64 publications

(27 citation statements)

References 71 publications

(105 reference statements)

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“…As the development of the electricity sector and economic growth as strongly correlated, it is very important to increase the ability to achieve economic independence based on domestic resources. Burke et al (2018) discovered some evidence that electricity supply reliability is essential for economic growth and recommended that the causal effects of electricity reliability, infrastructure, and access on economic growth be identified (Burke et al, 2018;Yoo and Kim, 2006). Hansen et al (2020) suggested that LCR should be used as part of renewable energy auction schemes in order to promote local industrial development, while Allan et al (2020) investigated LCR policy scenarios that would not only stimulate economic activity but also contribute significantly to the government's net zero emission goal, especially in the future development of offshore wind (Negara, 2016).…”

Section: Local Content Requirement (Lcr)mentioning

confidence: 99%

Policy Challenges of Indonesia's Local Content Requirements on Power Generation and Turbine Production Capability

Sitompul¹,

Endri

Hasibuan

et al. 2022

IJEEP

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The demand for electricity in Indonesia will continue to increase. Thus, the market opportunity for the power generation industry needs to be optimally utilized by domestic business actors through the Local Content Requirements (LCR) policy. Through exploratory techniques, the primary goal of this research is to assess the capability of Indonesia's national turbine industries and research institutions, as well as to develop policy recommendations for maximizing the use of local content in order to comply with the Ministry of Industry's Domestic Component Level Regulation, also known as Local Content Requirements (LCR). There are at least three challenges that need attention, namely technology capability and efforts, infrastructure, and institution. Although Indonesia has good prospects and opportunities to develop large-scale turbines, the challenges ahead in developing coal-fired turbines will be more complex due to the strengthening of the clean development paradigm. Thus, it is important to rethink the direction of developing LCR policies for coal-fired turbines. The study recommended budget allocation for ensuring continuity of turbine prototyping, simplify the process to obtain technology licensing, and developing industries that can support materials for turbine industries.

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Section: Local Content Requirement (Lcr)mentioning

confidence: 99%

Policy Challenges of Indonesia's Local Content Requirements on Power Generation and Turbine Production Capability

Sitompul¹,

Endri

Hasibuan

et al. 2022

IJEEP

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“…As Burke et al (2018) argue, electricity has offered advantages over other energy sources, enabling far more efficient technologies (like the information and communications technologies), a more productive organization of manufacturing and a more efficient lighting and providing productivity gains. To make the best of these advantages, a reliable supply of electricity and an adequate electricity network that answers to the volatile demand of electricity will be necessary.…”

Section: Economic Growth and Electricitymentioning

confidence: 99%

“…For all these reasons, the relationship between electricity and economic growth is an important issue to research, and the empirical evidence is inconclusive. Camarero et al (2015) classify the research approaches into groups based on different estimations.…”

Section: Economic Growth and Electricitymentioning

confidence: 99%

Economic growth or electricity, what came first in Spain after 1958?

Villarroya

Sanz-Villarroya

Pérez

2020

AEA

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Purpose With the opening up of the economy since the 1959 Economic Stabilization Plan, was it the production of electricity that drove the growth of gross domestic product (GDP) in Spain or, on the contrary, was it the growth of GDP that drove the production of electricity well into the 21st century? The purpose of this paper is to answer this question. Design/methodology/approach A cointegration approach based on the studies conducted by Pesaran and Shin (1999) and Pesaran et al. (2001) is applied, as it is suitable for short data series like those used in this paper. Findings The results of this paper allow us to conclude that electricity production boosted economic growth in Spain during the period under study, confirming the growth hypothesis. Research limitations/implications The results of this paper should be interpreted with caution, as electricity today amounts to less than a quarter of the total amount of energy used in Spain. It was not possible to incorporate other inputs to the production function (such as other energy inputs, technological or human capital), but the methodology used avoids the problems of omitted variables and of autocorrelation. Practical implications The results show that a small economy with limited resources, such as the Spanish one, is more vulnerable to energy shocks than other energy-sufficient economies. As Spain is a country with high energy dependence from abroad, the government must first ensure the electricity supply. Increased availability and access to different sources of electricity will improve the outlook for the Spanish economy. Conversely, a shortage in supply of electricity will constrain the regular pace of economic growth. Social implications Spain should investigate and explore more efficient and cost-effective sources of energy, in particular the renewable energies, as traditional energy sources will be scarce before long. Originality/value This paper differs from previous ones carried out for Spain in several aspects: it considers a broader period of time, from 1958 to 2015; the relationships between electricity production and GDP are analysed for the first time in a neo-classical production function where electricity, capital and employment are considered as separate factors; and a cointegration approach based on the studies conducted by Pesaran and Shin (1999) and Pesaran et al. (2001) is applied, as it is suitable for short data series like those used in this paper.

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“…Labor productivity is a key element for assessing the standard of living of those engaged in production processes in which labor remains the single most important input (OECD, 2001). While larger firms might be able to substitute other electricity resources (Foster & Steinbuks, 2009), this choice would be limited for smaller firms since providing small-scale electricity is generally costly (Burke, Stern & Bruns, 2018). Further, MSEs are more financially constrained compared with larger firms, thus it is less likely that MSEs have their own captive generators.…”

Section: The Impact Of Blackouts On the Performance Of Micro And Smalmentioning

confidence: 99%

The impact of blackouts on the performance of micro and small enterprises: Evidence from Indonesia

Falentina

Resosudarmo

2019

World Development

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Reliability of electricity supply is one of pressing challenges to many micro and small enterprises (MSEs) in developing countries. MSEs play a pivotal role in employment generation in these countries, but productivity of MSEs is relatively low. Little is known about how blackouts affect performance of MSEs. This paper is the first study to estimate the impact of power blackouts on productivity of manufacturing MSEs and to discuss the role of the government in addressing problem. We employ a pseudo-panel dataset covering six firm cohorts within 21 Indonesian national electricity company working areas from 2010 to 2015. Our identification strategy involves first examining blackouts determinants and then using these determinants as instruments in an IV dynamic panel fixed effects estimation while controlling for factors potentially affect productivity and correlated with blackouts. We find that electricity blackouts reduce the average labor productivity and the resultant loss amounts to approximately IDR 71.5 billion (USD 4.91 million) per year in Indonesia. Therefore, it is crucial to improve electricity supply reliability in developing countries. We find that introducing a captive generator as a way to cope with power outages, is positively associated with productivity, and MSEs that have captive generators benefit more when the power supply is poor. Our findings will assist policy makers to prioritize addressing power blackouts relative to other constraints MSEs face.

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The Impact of Electricity on Economic Development: A Macroeconomic Perspective

Cited by 64 publications

References 71 publications

Policy Challenges of Indonesia's Local Content Requirements on Power Generation and Turbine Production Capability

Policy Challenges of Indonesia's Local Content Requirements on Power Generation and Turbine Production Capability

Economic growth or electricity, what came first in Spain after 1958?

The impact of blackouts on the performance of micro and small enterprises: Evidence from Indonesia

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