Nuclear Energy Consumption and Economic Growth in the U.S.: An Empirical Note

Abstract

This empirical note examines the relationship between nuclear energy consumption growth and real gross domestic product (GDP) growth within a neoclassical production function framework for the US using annual data from 1957 to 2006. The Toda-Yamamoto (1995) test for long-run Granger-causality reveals the absence of Granger-causality between nuclear energy consumption growth and real GDP growth which supports the neutrality hypothesis within the energy consumption-economic growth literature.

Keywords:

• Granger-causality
• growth
• nuclear energy
• Toda-Yamamoto

Notes

¹Energy Information Agency (www.eia.doc.gov).

²The reactor capacity factor is the ratio of the gross electricity generated for the time considered to the energy that could have been generated at continuous full-power operation during the same period. Average reactor capacity factor increased from 53.5% in 1973 to 92% in 2007 (Energy Information Agency, www.eia.doc.gov).

³ Balat (2007) states that nuclear power plants in operation worldwide are producing more electricity, approximately a 16% share of the world's electricity supply.

⁴The survey pertains to individual country results and does not summarize panel data studies which include the US.

⁵While not explicitly testing for causality, Ewing et al. (2007) employ only forecast variance decompositions to infer the impact of various energy consumption measures on economic growth for the US.

⁶With respect to studies using cointegration and error correction models, short-run, long-run causality and strong-form causality (both the short-run changes in the lagged variables and error correction term are jointly significant) are considered in the determination of the direction of Granger-causality.

⁷The consequence of the short data span (50 observations) is the reduction in the power and size properties of conventional unit root and cointegration tests.

⁸Stern (1993, 2000), Ghali and El-Sakka (2004), Paul and Bhattacharya (2004), Oh and Lee (2004), Soytas and Sari (2006a,b, 2007), and Lee et al. (2008) include measures of labor and capital. Similar to Soytas and Sari (2006b) the growth rates of the respective variables are used as standard within a production function model.

⁹The results of the unit root tests are available upon request.

¹⁰The Ljung-Box Q-statistics at 12 lags reveal the residuals are free of serial correlation while the Breusch-Pagan-Godfrey and ARCH statistics indicate the residuals do not contain heteroskedasticity or autoregressive conditional heteroskedasticity, respectively. Moreover, the dummy variable, D79, was insignificant in the real GDP growth equation while negative and significant at the 5% level in the nuclear energy consumption growth equation (−0.1660), real gross fixed capital formation-real GDP ratio equation (−0.0045), and employment growth equation (−0.0131).