Electricity consumption and economic growth: evidence from Pakistan

The prime objective of this study is to examine the long run relationship between real GDP per capita and electricity consumption for Pakistan over the period 1971 to 2008. The results revealthat there is unidirectional causality from electricity consumption to real GDP per capita. The findings of the study also show that there is a long run relationship between real GDP per capitaand electricity consumption. The unidirectional causality running from electricity consumption to economic growth indicates that electricity is a limiting factor to economic growth and henceshocks to electricity supply will have a negative impact on economic growth. The implication emerging from this study is that for an electricity-deficient country like Pakistan, where the electricity sector operates at bare capacity margin, there is a need for planning and investment in infrastructure development to fulfill increased electricity demand.