Electricity consumption and economic growth: Exploring panel-specific differences

In this paper, we examine the long- and short-run dynamics between electricity consumption and economic activities, using panel data of per capita electricity consumption and per capita GDP of 160 countries for the period of 1980–2010, accounting for the degree of electricity dependence and the level of urbanization. Furthermore, in order to capture the differences in this relationship, the full sample is divided into various subsamples based on countries' income levels, regional locations and OECD memberships. This framework is argued and found to be appropriate since the causal links and inferences arising therefrom differ considerably among the subsamples, which led us to conclude that the electricity-growth nexus is highly sensitive to regional differences, countries' income levels, urbanization rates and supply risks. -- Highlights: •The causal relationship between electricity consumption and GDP is investigated. •Cointegration techniques are used for 160 countries and 13 subsamples. •Urbanization and electricity trade are accounted for as additional covariates. •Causal inferences are found to be associated with panel-specific differences. •Policy issues are discussed based on the study results