مصرف برق و رشد اقتصادی: شواهد از کره

This paper investigates the short- and long-run causality issues between electricity consumption and economic growth in Korea by using the co-integration and error-correction models. It employs annual data covering the period 1970–2002. The overall results show that there exists bi-directional causality between electricity consumption and economic growth. This means that an increase in electricity consumption directly affects economic growth and that economic growth also stimulates further electricity consumption.

In the past two decades, numerous studies have been conducted to examine the relationship between electricity consumption and economic growth. The overall findings show that there is a strong relationship between electricity consumption and economic growth. For example, Ferguson et al. (2000) has studied the issue in over 100 countries, and found that as a whole there is a strong correlation between electricity consumption and economic growth. However, the fact that there exists a strong relationship between electricity consumption and economic growth does not necessarily imply a “causal” relationship. The relationship may very well run from electricity consumption to economic growth, and/or from economic growth to electricity consumption. These causality issues, therefore, suggest the need to carry out further investigations. A major question concerning this issue is which variable should take precedence over the other—is electricity consumption a stimulus for economic growth or does economic growth lead to electricity consumption? Evidence on either direction shall have a significant bearing upon policy. If, for example, there is uni-directional causality running from electricity consumption to economic growth, reducing electricity consumption could lead to a fall in economic growth. On the other hand, if a uni-directional causality runs from economic growth to electricity consumption, it could imply that the policies for reducing electricity consumption may be implemented with little or no adverse effects on economic growth. And lastly, no causality in either direction would indicate that policies for increasing electricity consumption do not affect economic growth. In a summary of the literature on the causal relationship between energy consumption including electricity consumption and economic growth, there are a number of evidences to support bi-directional or uni-directional causality between energy consumption and economic growth.1 More specifically for electricity consumption, Yang (2000) found bi-directional causality between electricity consumption and economic growth in Taiwan, and Ghosh (2002) revealed that there exits uni-directional causality running from economic growth to electricity consumption in India without any feedback effect. More recently, Shiu and Lam (2004) showed that there is uni-directional causality running from electricity consumption to economic growth in China but not vice versa. Public policy makers in Korea have shown a great deal of interest in the role that electricity consumption plays in economic growth. The electricity infrastructure of Korea is becoming an increasingly important component of the economy (Han et al., 2004). In particular, greater use of information and communications technologies (ICTs) marks a worldwide transition towards a digital society that may profoundly affect electricity supply, demand, and delivery (Baer et al., 2002). In addition, as commonly known, electricity enhances the productivity of capital, labor, and other factors of production. To proactively cope with increasing electricity demand accompanying rapid economic growth, Korea should endeavor to uncover the causal relationship between electricity consumption and economic growth and to make appropriate electricity policy. This task has become one of the most important ones for Korea in the present and in the near future. The purpose of this paper is, therefore, to investigate causality between electricity consumption and economic growth, and to obtain policy implications from our results. To this end, the author attempts to provide more careful consideration of the causality issues by applying modern rigorous techniques of Granger-causality to the Korean data. The methods adopted here are in the following fashion. First, stationarity and co-integration are tested; second, error-correction models are estimated to test for the Granger-causality; finally, the F- and t-tests are performed to gauge the joint significance levels of causality between the two variables. Through the analysis, instead of arbitrarily choosing a lag length, Akaike’s information criterion described in Pantula et al. (1994) is employed to select the optimum lag. The remainder of the paper is organized as follows. Section 2 presents an overview of the proposed methodology. Section 3 explains the data employed and reports the empirical findings. A summary, some policy implications and conclusions of the study are made in Section 4.

The results of this study showed that there are uni-directional short-run causality from electricity consumption to economic growth, uni-directional long-run causality from economic growth to electricity consumption, and uni-directional strong causality from electricity consumption to economic growth. Overall, the author found that causality runs from electricity consumption to economic growth with feedback. This is consistent with Glasure and Lee’s (1997) research which dealt with energy consumption including electricity consumption in Korea. The study finding of bi-directional Granger-causality or feedback between electricity consumption and economic growth has a number of implications for policy analysts and forecasters in Korea. A high level of electricity consumption leads to high level of real GDP. The electricity consumption is the initial receptor of an exogenous impact and the equilibrium is restored through adjustment in the real income variable. This implies that electricity consumption infrastructure shortage may restrain the economic growth in Korea. Increasing real GDP requires enormous electricity consumption, though there are many other factors contributing to economic growth, and electricity is only one of such factors. In order not to adversely affect economic growth, efforts must be made to encourage government and industry to increase electricity supply investment. A policy for increasing electricity supply investment is, therefore, likely to enhance economic growth for Korea. In pursuit of continuing economic growth, Korea will need to put more efforts into increasing electricity supply investment when implementing national electricity supply infrastructure as a strategy toward advanced development in the long haul. Thus, this study generates confidence in decisions to invest in the electricity supply infrastructure. Furthermore, as implied by Baer et al. (2002), the payoff effect of ICTs on economic growth can be achieved only through a robust national electricity infrastructure that supports ICT adoption and applications. Moreover, this study lends support to the argument that an increase in real income, ceteris paribus, gives rise to electricity consumption. Economic growth results in a higher proportion of national income spent on highly electricity-consuming goods and/or services such as plasma display panel television and high-speed wired and/or wireless Internet connection, and stimulates further electricity consumption. Intuitively, increased real income requires enormous electricity consumption. For the newly industrializing countries such as Korea in general, electricity infrastructure is an important ingredient of economic growth. Fast economic growth has boosted the consumption of electricity over the past decades, rising at an annual rate of about 12% between 1970 and 2000. The figure far exceeds the annual growth rate of 6.8% in real GDP during the same period. Electricity now constitutes a critical factor in sustaining the well-being of the Korean people as well as the nation’s economic growth. Production in industries such as manufacturing, construction and transportation demands a substantial amount of electricity infrastructure. Therefore, electricity supply side measures in harmony with economic growth are needed. According to the national long-term power development plan, in order not to adversely affect economic growth Korea needs to build four power plants with an installed generation capacity of 1.91 GW every year and double the nation’s total power supply every 6 years to meet such a rapidly rising demand for electricity. In addition to supply side measures, demand side management measures, often referred to as second-hand power generation, are also needed. The electricity intensity (defined as the amount of electricity consumption per GDP) in Korea is 0.57 kWh/USD in 1998. The value is larger than those in the developed countries.4 High electricity intensity in Korea reflects inefficient electricity usage in industries and/or households, and indicates that there are high electricity saving potentials. The low electricity rates, much less that electricity production cost, established by the government in order to stabilize the general price level of the national economy encourage people to waste electricity. Thus, improving electricity efficiency of electrical appliances and equipment, reducing the loss in power transmission and distribution, and introducing various kinds of tariff reforms such as a summer peak-reduction tariff schedule aiming to control electricity consumption patterns through leveling projected electricity demand and saving supply costs of electricity can induce a high degree of efficiency in the existing facilities, without adversely affecting a high level of electricity consumption for economic growth. While causal linkages between electricity consumption and economic growth this analysis conclusively demonstrates and the implications of the results may be unique for Korea, it should be stressed that the techniques employed in this study can be readily applied to time series data from other countries and extended to other multivariate systems, where electricity consumption and real income are exposed to be determined by other economic factors such as net fixed capital stock, employment, exports etc. Furthermore, such an analysis could reveal the structural channels by which real income and electricity consumption are inherently causal. A final caveat is in order. Although bi-directional causality between electricity consumption and economic growth has been found in this study, it has not been possible to fully examine the relationship between the two because how much electricity consumption contributes to economic growth or economic growth to electricity consumption is still unknown. The work of uncovering the relationship remains a useful avenue for future research.