Economic growth and electricity consumption: Fresh evidence of panel data for LAC

Abstract

This study reexamines the causal nexus among electricity consumption (EC) and economic growth (EG) for a panel of 31 countries in Latin America and the Caribbean between 1980 and 2021. We find that there are statistically significant feedback impacts among the research variables in the long run. A 1 percent augment in EC raises EG by 0.5 percent and a 1 percent augment in EG produces a 1.54 percent increase in EC which reflects the nature of the latter as a luxury good and implies a tradeoff between economy and environment, since although greater electrical infrastructure drives EG, the latter also increases the EC whose use in a non-responsible manner could lead to environmental degradation through higher CO2 emissions. Therefore, the main policy implication is that, it is necessary to promote EG based on infrastructure focused on sustainable development, ensuring the well-being of present and future generations.