Empirical evidence regarding electricity consumption and urban economic growth

ABSTRACT

Links between electricity consumption and economic growth are fairly well documented for national economies, but less so for urban economies. The analysis of such relationships at the sub-national level of aggregation can potentially offer a useful complement to national-level research. This study examines the electricity-growth nexus in El Paso, Texas, while also considering the roles of capital stocks and employment. Testing suggests the presence of cointegrating relationships and a vector error correction model is estimated. Granger causality tests reveal the absence of causality between electricity consumption and personal income, implying that energy conservation efforts will have a neutral effect on economic growth. Furthermore, the results indicate that causality runs from the capital stock and employment to both personal income and electricity consumption. This echoes previous research regarding the importance of accounting for capital and labour factors of production in studies of aggregate electricity utilization and economic performance. The methodology used in this analysis to develop a broad synthetic measure of the urban capital stock, including various categories of public infrastructure, can also be applied to other regions and urban economies.

KEYWORDS:

• Energy-growth nexus
• capital stocks
• regional economic development
• electricity consumption
• Granger causality

JEL CLASSIFICATION:

• O40
• Q41
• R10

Acknowledgments

Financial support for this research was provided by El Paso Water, City of El Paso Office of Management & Budget, National Science Foundation Grant DRL-1740695, the UTEP Center for the Study of Western Hemispheric Trade, and the Hunt Institute for Global Competitiveness at UTEP. Econometric research assistance was provided by Patricia Arellano and Omar Solis.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Science Foundation [DRL-1740695]; El Paso Water; UTEP Hunt Institute for Global Competitiveness; City of El Paso Office of Management & Budget [13-1008-051 237563 MKB]; UTEP Center for the Study of Western Hemispheric Trade.