SEM Estimates: The Long-term Analysis of Pakistan's Electricity Demand and Supply Gaps

Abstract

The electricity consumption has vital implications for economic development of any country. The study at first looks into the inter-associations of electricity demand and electricity supply for the case of Pakistan. Later, it analyzes their impacts on GDP growth in Pakistan, using structural equation modeling for a time series data of forty-five years in Pakistan. We recommend that electricity supply can momentously enhance economic growth measured by Gross Domestic Product (GDP). Results of the study predicted that electricity supply in Pakistan was empirically proven to be demand driven. Adding to it, evidences were also found which predicted that electricity demand greatly depends upon electricity prices and urbanization. Lastly, it was found that electricity supply has a positive impact on GDP, which calls for policy implication to not only boast electric energy sector but also to increase its production and manage distribution losses and thefts.