The type of power capacity matters for economic development – Evidence from a global panel

Lorenzo Montrone, Jan Steckel and Matthias Kalkuhl

Resource and Energy Economics, 2022, vol. 69, issue C

Abstract: We examine the relationship between different types of power investments and regional economic dynamics. We construct a novel panel dataset combining data on regional GDP and power capacity additions for different technologies between 1960 and 2015, which covers 65% of the global power capacity that has been installed in this period. We use an event study design to identify the effect of power capacity addition on GDP per capita, exploiting the fact that the exact amount of power capacity coming online each year is determined by random construction delays. We find evidence that GDP per capita increases by 0.2% in the 6 years around the coming online of 100 MW coal-fired power capacity. We find similar effects for hydropower capacity, but not for any other type of power capacity. The positive effects are regionally bounded and stronger for projects on new sites (green-field). The magnitude of this effect might not be comparable to the total external costs of building new coal-fired power capacity, yet our results help to explain why policymakers favor coal investments for spurring regional growth.

Keywords: Energy and development; Economic growth; Public infrastructure; Public investments; Electricity sector (search for similar items in EconPapers)
JEL-codes: H76 O13 O44 O47 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:69:y:2022:i:c:s0928765522000306

DOI: 10.1016/j.reseneeco.2022.101313

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