Is the electricity sector a weak link in development?

Jonathan Colmer, David Lagakos and Martin Shu

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: electricity; economic development; weak link; tfp (search for similar items in EconPapers)
JEL-codes: O11 O4 Q43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2024-01-03
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126817

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