The effect of ICT development on economic growth and energy consumption in Japan

Abstract

A strongly held belief in Japan is that information and communication technologies (ICT) contribute to both a reduction in energy use and an increase in economic growth. As this assertion is presently unproven, the purpose of this analysis is to estimate the long-run relationship between ICT, energy consumption, and economic growth in Japan. Using an autoregressive distributed lag (ARDL) bounds testing approach, we estimate two different multivariate models corresponding to the production function and the energy demand function, both including ICT investment as an explanatory variable, over the period 1980–2010. The results reveal the presence of a long-run stable relationship, not only for the production function, but also for the energy demand function. However, in the production function, the long-run coefficient estimate for ICT investment is statistically insignificant, unlike the coefficients for labor, stock, and energy. In the case of the energy demand function, the coefficients for GDP, energy price, and ICT investment are statistically significant. The results also indicate that the long-run ICT investment elasticity of energy consumption is −0.155. On this basis, we conclude that while ICT investment could ceteris paribus contribute to a moderate reduction in energy consumption, but not to an increase in GDP.