Electricity Generation and Economic Efficiency: Panel Data Evidence from World and East Asian Countries

Abstract

This paper investigates the effect of electricity generation on countries’ economic efficiency. By using a sample of 42 World and East Asian countries for the time period 1996–2006 the paper employs Data Envelopment Analysis (DEA) window analysis and econometric panel techniques. The results reveal that there is an inverted U-shape relationship between electricity generation and countries’ economic efficiency. Finally, the turning point for the European countries is much smaller compared to the one of East Asian countries indicating that the European countries shift in energy use from electricity to other sources of energy. In addition the electricity generation–economic efficiency relationship depends also on the structure of the economy.

Keywords:

• Electricity generation
• economic growth
• generalized least squares
• DEA window analysis

Notes

1. For an extensive literature review regarding the causal relationship between electricity consumption and economic growth see Chen et al. (2007).

2. Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Italy, Japan, Lithuania, Malaysia, The Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Republic of Korea, Romania, Singapore, Slovakia, Spain, Sweden, Switzerland, Thailand, UK and the USA.

3. Table 1 provides the case of environmental efficiency ratios only for the Republic of Korea as an illustrative example due to the enormous quantity of results obtained. However all results are available upon request.