The Relationship between Industrial Electricity Consumptions, Industrial Employment and Industrial GDP

Abstract

The study was carried out to see how electricity effects industry by identifying the relationship between industrial electricity consumptions, industrial employment, and industrial GDP. Industrial electricity shortage has been a major threat and has caused approximately two percent loss to the Pakistan’s economy with the rate of unemployment reaching 6% during 2013-14, leaving millions unemployed across the country. Co-integration and granger causality test was employed to find the long-term relationship between industrial electricity consumption, employment, and industrial growth. Results revealed that all three; industrial electricity consumption, employment, and industrial growth, were stationarity at the 1^st difference and co-integrated on the basis of optimal lag selection criteria. Vector error correction model employed to test the speed of adjustment showed that industrial GDP & industrial electricity, and industrial employment & industrial GDP, both were significant at 5% level, while Industrial employment and industrial electricity was significant at 13.5%. Results of granger causality indicated that industrial electricity has a long-term relationship both with industrial GDP and industrial employment. Data analysis revealed that for Pakistan’s economic growth reliable electricity to industrial sector is essential and hindrance or unavailability of electricity to the industry will lead to unemployment and reduce economic growth.