Economic Effect of Electricity
on the World’s Least Developed Nations

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Economic Effect of Electricity on the World’s Least Developed Nations
Herbert M Barber, Jr, PhD, PhD
Xicon Economics

This research is reprinted here by permission from the author.

Abstract

The energy-economics nexus is a complex econometric paradigm that allows for the existence of unidirectional and bidirectional relationships across continuums demonstrating both effect and causality. To this end, however, the scientific literature remains ambiguous, with studies demonstrating effect and causality among variables, coupled with a host of studies that do not demonstrate effect or causality among variables, let alone direction. Understanding this paradigm becomes more important in less developed economies as policy makers attempt to force infrastructure as a means of promoting economic output.

The purpose of this study was to investigate the economic effect that electricity generation and consumption have on the world’s least-developed economies, as noted by the World Trade Organization (WTO). After calculating basic descriptive statistics, relationships among the economic and energy data were calculated using the Pearson Product moment method. To investigate effect, the researcher used analysis of variance (ANOVA) on economic and energy data from the 34 countries listed by WTO as the world’s least-developed countries, followed by the development of regression models that predict economic output using electricity generation and consumption as independent variables.

Economic output per capita ranged from approximately USD500 to USD2,000 per capita per year, with only approximately five or six countries rising above USD2,000 at any given time. On a quartile basis, per capita incomes averaged USD4,122 in the upper quartile and USD996 in the lower quartile. Further, economic output, as measured via GDP per capita (PPP) correlated significantly among several of the countries at the .01 and .05 alpha levels. For example, the relationship between economic output per capita in Angola and economic output per capita in Benin was significant at the .01 alpha level (r=.946), as well as the relationship between economic output per capita in Angola and Chad (r=.803, p<.01). Bangladesh generated more electricity than any other country in this study, on average, at 18,103.55 MkWh per year (1990-2009), while Benin, generated the least, at approximately 82 MkWh per year. Angola consumed more electricity annually than the other countries in this study from 2000-2010, at 4,475.45 BkWh, followed by Togo, at 3,875.00 BkWh. Further, electricity generation correlated significantly among many countries in this study, including the relationship between electricity generation in Angola and electricity generation in Mozambique (r=.882, p<.01). The relationship between electricity consumption in several countries was significant. For example, electricity consumption in Angola and Bangladesh and Burkina-Faso was significant at the .01 alpha level (r=.918 and r=.942, respectively). Analysis of variance (ANOVA) revealed that generation had a significant effect on economic output, as measured by GDP per capita (PPP), in Angola, Benin, Cambodia, Senegal, Tanzania, and Zambi (F(1,9)=103.578, p<.01; F(1,9)=8.197, p=.019; F(1,9)=5.916, p=.038; F(1,9)=6.678, p=.029; F(1,9)=56.474, p<.01; and F(1,9)=17.638, p=.002; respectively). Additionally, consumption was determined to have a significant effect at the .01 alpha level on economic output in Angola, F(1,9)=39.711; Djibouti, F(1,6)=16.991; Haiti, F(1,9)=20.768; and Zambia, F(1,9)=36.437. Additionally, consumption was determined to have a significant effect at the .05 alpha level on economic output, as measured by GDP per capita (PPP), in Mali, F(1,9)=8.428; and Solomon Islands, F(1,6)=5.991. Along with these analyses, three models were developed to forecast economic output. Follow this link to review the study... Economic Effect

About the Author

Dr. Herbert Barber is the CEO of Xicon Economics. With over 30 years of experience in infrastructure economics, coupled with 5 academic degrees in engineering and economics, including two earned doctorates, Dr. Barber is a expert as it relates to leveraging large infrastructure initiatives as means for increasing economic output.

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