Energy Consumption and Bi-Sectoral Output in Pakistan: A Disaggregated Analysis

Abstract

The objective of study is to check the vigorous impact of energy consumption on industrial and agricultural output with disaggregated analysis by having openness in both sectors and tube wells lone in agriculture sector as controlled variables. It is essential to analyze a connection between energy consumption and bi-sectoral output in Pakistan. Industrial and agricultural outputs have been taken as dependent variable, as they are mainly dependent on energy consumption. The data from 1999-2019 is employed for the analysis. The econometric technique autoregressive distributed lag (ARDL) results are showing a strong bond between energy consumption and industrial output in disaggregated relationship. Electricity shows a negative relationship with industrial output because of developing countries power supply failure dilemma. Similarly, agriculture sector shows significance with energy consumption in disaggregated analysis. Openness of agriculture and gas consumption in agriculture shows a negative but statistically significant relationship. Capital and labor in both sectors are highly influencing regressors as par neo classical output theory, in our disaggregated energy consumption analysis. Error correction regression shows a strong short run and long run relationship of energy consumption with industrial and agricultural output. The stability diagnostic recursive estimates show the perfectly interlinked variables in both models. The present research is equally important for the academic and policy makers as it reveals a strong bond between energy consumption and bi-sector output in Pakistan. Potential measures on energy supply can increase industrial and agricultural output.