In his recent Energy in Africa post Euan Mearns made this statement:
One hypothesis I want to examine is that electricity is fundamental to GDP and GDP growth. Without it, individuals cannot create wealth. I was therefore expecting to see that electricity consumption should be correlated with GDP and growth.
There’s no doubt that electricity is fundamental to GDP growth and that wealth in our modern society cannot be created without it, but a key question is; which comes first? Does the electricity create the wealth, or does the wealth create the electricity, or is the linkage between the two so close that it’s impossible to say? This will be the second question this post addresses.
The first will be the question of the correlation between GDP growth and electricity consumption that Euan was expecting to see but which was not visible in the small sample of African countries he reviewed. But again there’s little doubt that such a relationship exists, and a larger sample should reveal it. Accordingly this post expands the sample size to 168 countries in order to determine how strong the relationship is and how it varies from place to place.
The data used in this review are from the following sources: Population data (mostly 2014 and 2015 estimates) are from Wikipedia . Nominal per-capita GPD data (2013 estimates) are from the UN and electricity consumption data (2012 estimates) are from EIA. It should be noted that the numbers in these data sets are not always the same as those published by other sources, such as the World Bank, the IMF and the CIA. I suspect that the impact of using these alternative data sets would be to shuffle the points on the graphs without materially changing the conclusions but am unable to guarantee this.
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