Electricity consumption and economic growth in Nepal
Explainer of Shakya et al. (2018), International Journal of Global Energy Issues. Not the journal article.
Citation: Shakya, S., Nepal, R., & Sharma, K. (2018). Electricity consumption and economic growth: empirical evidence from a resource-rich landlocked economy. International Journal of Global Energy Issues, 41(5-6):226-247. Download
Facts¶
Main finding¶
Empirical evidence from Nepal’s experience as a resource-rich landlocked economy demonstrates a significant positive relationship between electricity consumption and economic growth using time-series analysis.
One caveat¶
Time-series analysis cannot establish causality definitively and may conflate electricity’s role with other development factors simultaneously driving growth.
Policy hook¶
Nepal’s economic development depends on energy availability, but the relationship between electricity consumption and growth is contested. Does increased electricity consumption drive economic growth, or do other factors explain the correlation?
Data and setting¶
Nepal economic data; time-series analysis examining relationship between electricity consumption and economic growth in a resource-rich landlocked developing economy.
Research design (plain language)¶
Time-series econometric analysis examining the dynamic relationship between electricity consumption and economic growth in Nepal’s specific development context.
PDF or DOI¶
Why it matters¶
Energy scarcity is a binding constraint on development in many low-income countries, especially landlocked economies without fossil fuels. This paper documents a positive relationship between electricity availability and growth in Nepal - a high-altitude, landlocked country where hydropower is both abundant and underdeveloped. For Nepal specifically, the finding supports hydroelectric investment as a development priority. For other resource-rich developing countries, the result suggests that energy infrastructure is complicit in growth: electricity enables productivity gains across sectors. The time-series approach captures dynamic relationships but cannot isolate causality - growth may increase demand for electricity rather than electricity driving growth. For policy makers, the paper validates putting first electricity access in development plans, though the mechanism (productivity, consumption, investment) remains to be clarified. The work also provides a developing-country perspective on energy-growth relationships, adding to research on high-income countries where electricity is abundant and relationships may differ.