Development, Growth, and Electricity in East Asia
Di Pietro, Bryan
This paper examines the relationship between electricity consumption growth and GDP growth using an endogenous growth model. The countries of East Asia have industrialized in a remarkably short time. Some countries in the region have surpassed advanced industrials such as Australia and New Zealand as well as several European states in the value of their economies measured in GDP per capita. These countries have been able to adopt and tailor policies, institutions, market structure, and technology to suit the individual needs of their state. Electricity is necessary to many aspects of modern development. Lack access to cheap, reliable electricity will limit growth. The sample compares three classes of countries in the Pacific Rim referenced against the United States for GDP per capita, Electricity Consumption per capita, and Gross Capital Formation. By applying these components to an endogenous growth model to isolate the effects or implications of increasing electricity generation on GDP growth, this study looks at policy ramifications for the countries still lagging economically in the region as well as extrapolating the results to other under-developed nations. The study addresses historical trends, colonial and cold war legacies, economic and political institutions as well as the role of corruption involved in economic growth. The development of distributed generation and rural electrification programs seem to support overall economic activity and lessen the effects of strongly centralized economic infrastructure. Lastly, the deployment of renewable energy does not positively affect GDP growth from the findings of this study although the amount of data was limited and/or did not measure the relevant aspect. Reducing resource costs should have a positive affect of economic development as well as reducing the fixed capital costs of large scale energy generation by transitioning to smaller decentralized systems.
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