Sector Output Research Articles

Social and economic aspects of the recent fall in global oil prices

Purpose The global energy market has been facing lower prices of crude oil in recent years. Lower fuel price leads to lower transport cost and cheaper agricultural inputs (such as pesticides and chemical fertilizer), resulting in lower prices of agricultural commodities in the international markets. On the other hand, lower global oil price reduces the oil revenues of oil exporting countries, resulting in a decrease in government expenditures. Therefore, the purpose of this study is to examine the impacts of lower global oil and agricultural commodity prices and government expenditure on the entire economy and poverty level of Malaysia. Design/methodology/approach This study used a computable general equilibrium model (CGE) to investigate four simulation scenarios based on the latest Malaysia’s input-output table belonging to 2010. The first scenario is a 30 per cent fall in the export and import prices of agricultural commodity prices, while the second is a 50 per cent decline in the export and import prices of crude oil, and the third combines them. In the fourth scenario, government operating expenditure declines by 4 per cent because of the fall in government’s oil revenues as a result of the decline in global oil prices. Findings The simulation results suggest that lower international oil price decreases real gross domestic product (GDP) and investment in Malaysia and influences positively the output and employment of some agriculture sectors. However, lower agricultural commodity price increases real GDP and investment in the country and negatively influences the output, employment and exports of all agriculture sectors. The decline in government expenditures also increases the output and the employment in the economy, whereas it decreases household consumption. In conclusion, results show that the agriculture sector losses from the current decline in international agricultural commodity prices, while it benefits from lower oil and government expenditure. Originality/value The main contribution of this study is comparing the impacts of recent falls in global oil and agricultural prices on the entire economy and agriculture sector of Malaysia. Investigating the impacts of these issues on the poverty level of Malaysian households is another contribution to the study. Another contribution is analyzing the impact of a reduction in government expenditures because of the decline in global oil price on the economy and welfare of Malaysia. Therefore, this study makes a useful contribution to the small literature of the topic.

Monetary Transmission Channel, Oil Price Shock and the Manufacturing Sector in Nigeria

Abstract Research background: The need for diversification of the Nigerian economy has been emphasized and the manufacturing sector has a major role in this. Being an oil producing country, monetary policy is an important macroeconomic policy that has always been used to manage the influence of oil price shock on the manufacturing sector. Purpose: The study examines the relationship between oil price shock, the monetary transmission mechanism and manufacturing output growth in Nigeria. Research methodology: The study applied the structural vector auto regression (SVAR) modelling technique and a descriptive analysis. Results: The results of the study show that the exchange rate is mostly affected by the oil price shock, while the monetary policy instruments and inflation rate are also very responsive to the exchange rate shock. The manufacturing sector output growth has also been shown to be strongly affected by the inflation rate and monetary policy shocks. Novelty: The study has revealed the most effective channel via which oil price shocks affect manufacturing output. The exchange rate channel of the monetary policy transmission mechanism is the most significant channel through which oil price shock affects manufacturing output growth in Nigeria. This shows that effective management of the exchange rate policy via the appropriate monetary policy approach can be used to minimize the adverse effect of oil price shocks on Nigerian manufacturing output.

Decomposing the Changes in Water Intensity in a Mediterranean Region

This paper proposes a new method for decomposing temporal changes in water use intensity (i.e. quantity of water consumption divided by GDP) into various explanatory factors. Specifically, the changes are decomposed into three elements that clarify some of the hidden reasons behind changes in water use over time. The first one captures changes in water intensity due to sectoral uses, showing the effects of modifying water intensity in the various production sectors. The second shows the changes in sectoral output intensity, showing how altering the production structure affects water consumption. Finally, the third quantifies the effects of changes in residential water intensity, showing how changing the final water uses affects water intensity. The empirical application corresponds to the Spanish region of Catalonia. The results show a reduction in regional water intensity due to a negative contribution from the production structure and residential uses of water, which were greater than the increase in sectoral water intensity. This decomposition shows that the reduced importance of agricultural production had the greatest influence on the reduction in water intensity in this region. The directions and magnitudes of the components identified in this paper highlight the importance of using precise and detailed methods to study water issues.

Comparing dynamic multisector models

We construct a multisector DSGE model with input–output linkages and a single type of physical capital that is costly to reallocate across sectors. Our model with intratemporal costs of allocating capital fits sectoral output data as well as existing models with sector-specific capital, both in terms of volatility and comovement with aggregate output as well as pairwise correlations between sectors. The spectra of sectoral output produced by our model is similar to those from the other models. The importance of sectoral shocks in our model is also similar to those from other models. However, our simplified model is much more amenable to extensions involving occasionally-binding constraints than the competitor models that feature large state spaces.

Does the composition of government expenditure matter for Eastern Caribbean economies’ long-run sectoral output growth?

PurposeThis study takes a disaggregated approach to investigate the impacts of long-run GDP on changes in total government expenditure in the Eastern Caribbean Currency Union (ECCU) economies. An understanding of the relationship between changes in total government expenditure and GDP (by sector categories) is expected to provide a working tool to understand the growth debt nexus of Caribbean countries. The purpose of the paper is to use an auto regressive distributed lag (ARDL) and error correction model (ECM) to examine and analyse short- and long-run dynamics of disaggregated approach to both output and government expenditure in a dynamic model to identify the growth in the Eastern Caribbean Countries.Design/methodology/approachIn an attempt to examine the long-run dynamics, data for the period 1970-2015 were used in an ARDL and ECM framework. The authors examine the long-run GDP impacts of changes in total government expenditure and in the shares of different spending categories for the ECCU countries to establish and analyse short and long-run dynamics.FindingsThe results suggest that total fiscal expenditure and disaggregated expenditure including debt services have both positively and negatively contributed to economic growth in the agriculture, manufacturing and mining sectors. Among others, the study found that high national debt in the region resulted primarily from increases in government expenses and diminishing income sources.Originality/valueThis paper is the first to take a disaggregated approach to investigate the relationship between economic growth and government expenditure in the Eastern Caribbean States. The authors’ empirical results suggest that debt servicing reduces economic growth both in the short and long run. The greatest impact being felt in the mining and manufacturing sectors, namely, 1 per cent increase in debt service will bring about 7.90 and 1.67 per cent decrease in economic growth. These results offer fairly strong support to the view that expenditure share variables can weaken sectoral growth, and hence force the overall growth to decline.

An Empirical Analysis of the Impact of Foreign Direct Investment and Industrial Sector Performance on Nigerian Economy

This research investigated the impact of foreign direct investment and industrial sector performance on Nigeria economy using time series annual data from 1981 – 2015. The study explores dynamics amongst the variables within the Vector Error Correction Model (VECM). The Augmented Dickey Fuller (ADF) and Philip Perron’s (PP) test reveals that all variables contained a unit root and were integrated of order one I(1). The Johansen Cointegration test result reveals the presence of a long-run relationship between FDI, Industrial Sector Output and GDP. Furthermore, VECM estimate shows that FDI and industrial sector output had a slight significant positive impact on GDP.The study concludes that Nigeria is yet to fully reap the benefit of FDI since its contribution to GDP is still very low at the moment, whilst the contribution of the industrial sector in the country has not been vibrant enough to spur economic growth in Nigeria. The study therefore recommends among other things that social and economic infrastructure be improved as this will help lessen the burden of industrialist and eventually lower the cost of doing business and in turn attract FDI inflow into Nigeria. Keywords : Industrial Sector, Dynamics, Cointegration, Inflow, Economy DOI : 10.7176/EJBM/11-11-08 Publication date : April 30 th 2019

Exchange Rate Regimes and Real Sector Performance in Nigeria

Exchange rates and the choice of the exchange rate regime have critical influence on the real sector performance and the behaviour of several other macroeconomic variables, especially in a high import dependent economy like Nigeria. Exchange rate reforms put in place by the Nigerian monetary authorities have not put the economy on the path of macroeconomic stability, recovery and sustainable development. Arising from this problem, this study investigates the relationship between exchange rate and the performance of Nigeria’s real sector with emphasis on the agricultural, industrial, building and construction, wholesale and retail trade and service sectors over the period of 1961-2017. The study adopts the modified Mundell-Fleming IS-LM framework. Autoregressive Distributed Lag and pairwise Granger Causality techniques were used to examine the relationship between exchange rate regime and real sector output performance. The results of the study reveals a long-term inverse and significant relationship between exchange rate and aggregate real output in regulated exchange rate regime but a long-term direct and significant relationship in the guided deregulated regime. The study therefore recommends that the monetary authorities should re-assess and adequately monitor the existing exchange rate policies in Nigeria with a view to stimulating increased performance of the real sector of the economy. The exchange rate system adopted should be aligned with the overall macroeconomic policy structure and also takes into consideration the integrity of the institutional arrangements on which the country’s development and stability prospects depend. The government should also develop a broad programme of development of domestic industries in both rural and urban areas to enhance domestic production, exports, create employment and reduce poverty. There is also the need to implement coordinated macroeconomic policies that would attract foreign private investment, impact inflation positively and stimulate exchange rate stability.

Monetary Policy and the Performance of the Crude Petroleum and Natural Gas Sector in Nigeria (1986-2017)

This study examined the effect of monetary policy on the performance of the Crude Petroleum and Natural Gas sector output in Nigeria. The explanatory variables are monetary policy rate, Treasury bills rate, Cash reserve requirement and money supply; while the dependent variable is the Crude Petroleum and Natural Gas (PEGAS) sector output. The study adopted an ex-post facto research design and used secondary data obtained from the CBN Statistical Bulletin. The study covered a period of 32 years (1986 to 2017). The data were subjected to Augmented Dicker Fuller stationarity test to determine the best suitable econometric tool of analyses. The Autoregressive Distributive Lag (ARDL) was used for data model estimation. The results revealed that: monetary policy tools have no significant effect on the crude petroleum and natural gas output, both in the long and short run; that of all the monetary policy variables in the model, only money supply (M2) has a significant short run effect at the first lag period [M2(-1)]. The study thus concluded that monetary policy has not been an effective long run policy instrument that can largely influence the crude petroleum and Natural Gas sector output in Nigeria. The study recommends that the CBN use expansionary monetary policy that can increase money supply to the PEGAS to boost output indirectly. The study introduced model for the Crude Petroleum and Natural Gas sector output and monetary policy nexus in Nigeria.

ARAHAN PENGEMBANGAN AGROINDUSTRI KARET DALAM PENINGKATAN EKONOMI WILAYAH DI KABUPATEN ROKAN HULU, PROVINSI RIAU

Abstract: High production of rubber plants in Rokan Hulu district has not significantly contributed yet to increasing the welfare of rubber farmers. This is due to a lack of rubber processing industry, leading to rubber being sold in the form of primary product (fresh sap). Therefore, developing an agro-rubber industry is of capital importance. The purposes of the present study were (1) analyze the marketing margin of rubber gum at each marketing level in Rokan Hulu district; (2) analyze the role of rubber agro-industries in the economics of Kampar and Rokan Hulu regions; (3) develop rubber agro-industry to improve the economics of Rokan Hulu district. The methods used in the present research included analysis of marketing margins, input and output analyses, and AHP (Analytical Hierarchy Process). The results showed that both crumb and smoked rubbers sectors play strategic roles in developing other sectors in Kampar district (DFL, IFL> 1). In addition, it was also observed that the rubber sector tended to use the output of other sectors as production inputs (DBL, IBL> 1). Both crumb and smoked rubbers sectors had great abilities to influence not only the regional output multiplier (multiplier output), but also the income multiplier (income multiplier) (I > 1). However, the ability of the NTB multiplier (multiplier NTB) to improve the sectors was very low (NBT <1). This showed that rubber industry has better development opportunities in Rokan Hulu. The type of rubber processing industry to be developed in Rokan Hulu depends on the perceptions of stakeholders. For instance, a rubber industry that can produce products such as rubber crumb, sheet, Sir 10, and Sir 20. Initial attempts by local government in developing the rubber industry is the increase of qualified, skilled, and reliable human resources to insure optimal functioning of the rubber agro-industry.

FAKTOR –FAKTOR YANG MEMPENGARUHI KESEMPATAN KERJA PADA SEKTOR PERTANIAN DI SULAWESI SELATAN

This study aims todetermine how much influencethe level of FDI, the level of domestic investment, and government spending on agricultural employment through agricultural output. The types of data used in this study are secondary data. Secondary datain the form of time series data from 2001to 2010 on the level of FDI, the level of domestic investment, government spending on agriculture, agricultural output, and employment in the agricultural sector in the province of South Sulawesi. The data is processed using computer software"SPSS 16.0" with multiple linear regression analysis method in twostages. The results and the estimation of data through multiple linear regression method in two stage shows that the effect of FDI and domestic investment on employment levels of the agricultural sector through the output of the agricultural sector and a significant negative effect, government expenditure on the employment by sector output agricultural positive and significant at the level confidence(α = 10%), while no significant effect on the level of domestic investment opportunities through agricultural.

Monetary Policy and the Performance of the Manufacturing Sector in Nigeria (1986-2017)

This study examined the effect of monetary policy on the performance of the Manufacturing sector in Nigeria. The explanatory variables are monetary policy rate, Treasury bills rate, Cash reserve requirement and money supply; while the dependent variable is the Manufacturing (MANU) sector output. The study adopted an ex-post facto research design and used secondary data obtained from the CBN Statistical Bulletin. The study covered a period of 32 years (1986 to 2017). The data were subjected to Augmented Dicker Fuller stationarity test to determine the best suitable econometric tool of analyses. The Autoregressive Distributive Lag (ARDL) was used for the model estimation. The results indicate that: monetary policy tools have significant effect on the manufacturing sector output in Nigeria in the short run only. The study thus concludes that monetary policy tools may not be a long run policy instrument for the growth of the manufacturing sector output in Nigeria but rather short run instruments. This study recommended that money supply and treasury bills can be used in the short run as policy instruments to maintain macroeconomic stability in Nigeria with reference to the manufacturing sector.

Energy Consumption and Performance of Sectoral Outputs: Results from an Energy-Impoverished Economy

This paper is directed at exploring the relationship among energy consumption, disaggregated sectoral output (GDP) and economic growth in Nigeria using time series data. The study applied a plethora of estimation techniques (multivariate unit root, Johansen cointegration and Granger causality tests). The study found that energy consumption has enhanced the performance of agriculture, health, manufacturing, utilities, finance and transport sectors in Nigeria during the period under consideration. Long-run energy consumption was found to be detrimental to the performance of administration output (GDP). The study recommends that energy consumption should be encouraged essentially for sectoral and industrial purposes (the production of intermediate goods and services) and not only for household consumption.

Nexus between Agriculture and Unemployment in Nigeria

This study examined the impact of agriculture sector growth on unemployment level as well as the direction of causality between agricultural sector output and unemployment level in Nigeria. Secondary annual time series data between 1981 and 2016 were used for the study. Data on unemployment rate, agriculture sector output, public expenditure and industrial output were obtained from the Central Bank of Nigeria’s statistical Bulletin while data on FDI and population growth were obtained from the World Bank World Development Indicators. The data were analyzed using ADF (Augmented Dickey Fuller Test) unit root test, Autoregressive distributed lag Bounds test of cointegration, Autoregressive distributed lag error correction model estimation and Granger causality. The results of ADF unit root test revealed variables were at different orders of integration, the ARDL bounds test revealed cointegration between variables, and the Autoregressive distributed lag error correction model estimation revealed that change in agriculture output in the current period is negative and significant for current unemployment level in Nigeria, while the change in one period lagged agriculture output was positive and significant for current unemployment level in Nigeria. Also the error correction term indicated that about 74.10 percent of the disequilibrium in the system in the previous year would be corrected in the current year. Granger causality test results revealed bi-directional causality between agriculture output and unemployment level in Nigeria. The study recommends that the Nigeria government should using strategic policies targeted at boosting agriculture output such as increasing access to land for peasant rural farmers, investments in agricultural research, and so on, seek to boost agriculture output in order to reduce unemployment in Nigeria. Further, the Nigeria government should ensure that agriculture sector development policies are consistent with the objective of reducing unemployment in Nigeria.

Reforming Spending Policy and Its Impact on Indonesia’s Economy: The Case of Fuel Subsidy and Infrastructure

The quality of Indonesia’s infrastructure up until 2014 was considered uncompetitive, and one of the reasons was that there was not enough money spent on infrastructure, and too much on fuel subsidy. In November 2014, the government of Indonesia decided to cut the expenditure for fuel subsidy and reallocate the money to invest on public services. This study was conducted with the intention to quantify the impact of the program on economic growth and income distribution in Indonesia using Social Accounting Matrix (SAM) model. Simulation results indicated that the impact from social and human capital infrastructure was bigger than that of economic infrastructure, although the simulation for both categories resulted in an increase of sectoral output and domestic income. Therefore, improving infrastructure, especially social, is vital to stimulate economic activity in the long run.

The Influence Of Fiscal Policy On Agriculture Sector In Java Island

One of government interventions to encourage the improvement of agriculture sector output is through fiscal policy in the form of government spending. Total government expenditure in provincial aggregate is used as government spending. The availability of fiscal decentralization policy provides an opportunity for the provincial government to manage the government expenditure allocation. This research aims to discover the influence of fiscal policy in Java by using the government expenditure variable and to find the influence of foreign investment, domestic investment and agricultural labor absorption toward GRDP of agriculture subsectors. This research used regression analysis of cross section SUR fixed effect panel data. The results indicate the total expenditure having significant positive effect towards GRDP of agriculture subsectors are the subsectors of food crops, plantation, livestock and fishery. Forestry subsector cannot be analyzed further because the error is not normally distributed. The absorption of labor in agriculture sector has significant negative effect towards plantation and livestock subsectors. The foreign investment has significant positive effect towards livestock subsector and domestic investment has negative significant influence towards GRDP of food crops subsector. The provincial government needs to support agriculture subsectors by allocating expenditure that will increase GRDP of agriculture subsectors and increasing foreign direct investment and domestic investment to agriculture subsectors.

The real exchange rate, structural change, and female labor force participation

While a large literature examines the role of fiscal policy in reducing gender gaps in labor market outcomes, scant evidence exists for the role of monetary and exchange rate policies in doing so. Recent studies have shown that targeting an undervalued real exchange rate stimulates economic growth by expanding tradable sector output. We examine whether such growth reduces gender gaps in labor force participation by improving labor market opportunities for women. Using a comprehensive cross-country dataset from 1960 to 2015 for a maximum of 103 countries, we test whether there is a robust relationship between currency undervaluation and female labor force participation. We find that countries that maintain an undervalued real exchange rate realize an increase in female labor force participation, and a corresponding decline in the difference between male and female labor force participation rates. This finding is particularly pertinent for developing countries and is robust to various specification checks as well as different estimation techniques. We also provide suggestive evidence that the operative channel is an expansion of female employment in manufacturing and industrial sectors. Our findings have important policy implications, particularly for countries in earlier stages of their development. Our results indicate that the positive effect of undervaluation on female labor force participation is stronger in developing countries, implying that there may be opportunities for interventions to target a more undervalued real exchange rate in these countries. Hence, competitive exchange rate policies matter not only for raising long-term growth potential, but also for reducing longstanding gender disparities in labor force participation.

“一带一路”基础设施发展对贸易成本冲击影响分析 (Economic Impact of Infrastructure Development on the 'Belt and Road' Countries）

Chinese Abstract: 在中国“一带一路”政策推进过程中，促进沿线国家基础设施建设是中国对外经济贸易政策重点。与此同时，因基础设施建设项目导致的贸易便利化程度改善也增进了中国与“一带一路”沿线国家的贸易往来和经济联系。本文将采用全球可计算一般均衡模型，模拟量化“一带一路”基础设施项目发展对沿线国家带来的经济影响。模型根据贸易便利化所带来的贸易时间成本减少转化为等值关税，并以此作为政策冲击量化依据设置不同的模拟情景。模拟结果表明，在贸易便利化程度优化前提下，包括中国在内的“一带一路”沿线国家经济都呈现正增长，但美国、日本、韩国则由于“一带一路”区域贸易战略的实施导致贸易转移，GDP出现不同程度下降。中国建造业、金属产品、钢铁、运输工具以及机械设备等与基础设施建设密切相关的行业部门产出也出现增长。 English Abstract: Infrastructure development is one of the strategic initiatives of China’s “Belt and Road” strategy. At the same time, the improvement of trade facilitation resulted from infrastructure development has also strengthened China’s trade and economic connections with “Belt and Road” countries. This article uses global computable general equilibrium (CGE) model to quantify the economic impact of infrastructure development on “Belt and Road” countries. The model transfers the “shock” of trade facilitation into the reduction of tariffs and sets two simulation scenarios. The result shows that the improvement of trade facilitation will lead to positive economic growth of the “Belt and Road” countries. Otherwise, GDP in the US, Japan and Korea will decrease because of the effect of trade transfer to “Belt and Countries” countries. In China, the output of infrastructure-related sectors, including construction, metal products, ferrous, vehicle and mechanical equipment, will increase.

ANALISIS KESEMPATAN KERJA PADA SEKTOR PARIWISATA (SUB SEKTOR PERHOTELAN) DI PROVINSI-PROVINSI INDONESIA

This research purpose are to the analyse how the impact of the number of accommodation business, number of visitors to accommodation, output of the hotel sector and the wage on the employment opportunities of the hotel sector in the Indonesian Provinces using the panel regression method based on the fixed effect model (FEM) approach. This type of research is descriptive and associative research, where the data used are secondary data in the form of panel data (pool time series) from 33 provinces in Indonesia during the period 2012-2016. The results of this study indicate that the variable number of business accommodations, the number of visitors to accommodation has a positive and significant effect on the employment opportunities in the hotel sector in the Indonesian Provinces, the hotel sector's output variables have a positive but insignificant effect on the hospitality sector employment opportunities in the Indonesian Provinces and wages have a non-significant negative influence on the employment opportunities in the hotel sector in the Indonesian Provinces.Keywords: Hospitality Sector Job Opportunities, Accommodation Business, visitors to accommodation, Hospitality Sector Output, Wage

Long and Plosser meet Bewley and Lucas

We develop an N-sector business cycle network model a la Long and Plosser (1983), featuring heterogenous money demand a la Bewley (1980) and Lucas (1980). Despite incomplete markets and a well-defined distribution of real money balances across heterogeneous households, the Bewley–Lucas–Long–Plosser model remains analytically tractable with closed-form solutions. Relying on the tractability, we establish several important results: (i) The economy’s input-output network linkages become endogenously time varying over the business cycle—thanks to the endogenous time-varying distribution of money demand and its influence on cross-sector allocations of commodities. (ii) Despite flexible prices, transitory money injections can generate highly persistent effects on sectoral output, also thanks to the time-varying distribution of money demand and its effect on input-output coefficients. (iii) Although money injection is distributed equally across households by design, the real effects are asymmetric across production sectors; e.g., the impact of money is strongest on downstream sectors that purchase intermediate goods from the rest of the economy, but weakest on upstream sectors that supply intermediate goods to the other sectors, in sharp contrast to the case of sectoral technology shocks and government spending shocks. Our model also provides a micro-foundation for the labor wedge and shows that movements in the distribution of money demand can explain the cyclical behavior of the labor wedge.

The impact of electricity prices on sectoral output in South Africa from 1994 to 2015

PurposeThe purpose of this paper is to examine the impact of electricity prices on sectoral output in South Africa from 1994 to 2015 and also econometrically examine the impact of electricity prices on output at sectoral levels over the same period. The paper also put forth a policy proposal that brings together electricity end-users, suppliers and government regulators with the goal of conveying an effective outcome that withstands output growth without necessarily compromising social and developmental objectives.Design/methodology/approachLocal sources of data were utilised in applying panel data analysis. The paper utilised the data from South Africa Reserve Bank and Quantec South Africa. The Hausman test indicated that the fixed effect estimator is the appropriate estimator for this paper. Robust estimators (such as Driscoll Kraay (SCC), feasible generalised least of squares, least square dummy variables and seemingly unrelated regression (SUR) were employed for consistent and efficient inferences. The study also utilised the SUR regression to analyse the impact of electricity prices on output at a sectoral level.FindingsThe fixed effect estimator results of this paper indicate that electricity prices have a negative impact on sectoral output. Again, the SUR estimator shows that the sectoral output disparately responds to electricity prices change in South Africa over the period 1994–2015.Thus, six out of eight sectors significantly and negatively respond to electricity prices change in South Africa. The mining and the construction sectors seem not to be affected by electricity prices changes unlike agriculture, manufacturing, government services, transport and communication finance and trade.Research limitations/implicationsAlthough the research has attained its aims, there were some inevitable limitations. For instance, unlike the time series and cross-sectional data, the panel data were tardily assembled, since the researchers had to gather data for specific variables for each and every selected individual sector. However, this did not compromise the research findings since the panel data from both developed and developing countries are available from sources such as Easy data Quantec.Practical implicationsThe results of the study show that electricity price is a limiting factor to the sectoral production growth in South Africa. Therefore, any conservation policies regarding energy or electricity should be implemented with caution. Indeed, the government should implement policies that increase energy and electricity supply in the country. Thus, the government should set affordable prices of electricity that benefits both the power and economic sector output. In addition, the electricity regulators should set prices that do not damage output across economic sectors in South Africa. Again, the government should continue supporting the imposition of subsidies on the economic sectors that are more sensitive to electricity price. To this end, the study provides a policy proposal (in line with the South African National Development Plan and the climatic change strategies) that connects electricity producers, government electricity regulators, consumers and the society with the goal of conveying an effective outcome that withstands output growth without necessarily compromising social and developmental objectives.Social implicationsCost-reflective electricity prices may be a burden to end users but this will assist in the maintenance and expansion of the power industry to get rid of electricity supply and demand imbalances which may escalate electricity prices in future. Indeed, the electricity end users including the society should pay a price that improves generation capacity to avoid power shortages since the lack of energy (electricity) contributes to poverty and deprivation and can contribute to economic decline. In this regard, the government should work hard to reduce the public resistance towards the cost-reflective electricity prices strategy; there is a need to keep the electricity end users informed on the economic impacts of such strategies in order for them to make informed choices.Originality/valueThis paper utilised the panel data for sectoral analysis. Again, the study aimed to provide policymakers with more information on the behaviour of different sectors with regards to electricity price changes, and hence assisting regulators and policymakers in future decisions on electricity price changes in relation to output at sectoral levels. Better knowledge of the link between electricity prices and the real sector output should permit better regulatory decisions to facilitate economic efficiency. Furthermore, it helps the government to identify sectors in need of power subsidies to enhance economic development.