Is the electricity sector a weak link in development?

Colmer, Jonathan, Lagakos, David and Shu, Martin (2024) Is the electricity sector a weak link in development? CEP Discussion Papers (CEPDP1970). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

This paper asks whether increasing productivity in the electricity sector can yield larger long-run GDP gains than suggested by electricity's small share of aggregate economic activity. We answer this question using a dynamic model in which electricity is a strong complement to other inputs in production. We parameterize the model using our own new measures of electricity-sector TFP across countries. The model predicts modest long-run GDP gains from improving electricity-sector TFP, contrary to the notion that electricity is a weak link. Parameterizations that make electricity a weak link mostly require the electricity sector to be counterfactually large or unproductive.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
Date Deposited:	10 Feb 2025 15:30
Last Modified:	11 Sep 2025 05:21
URI:	http://eprints.lse.ac.uk/id/eprint/126817

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