The Relationship between Electricity Consumption, Employment Rate, Inflation and Economic Growth in Five Developing Countries

Abstract

This paper explores the relationship between electricity consumption, employment rate, Inflation and economic growth in the developing countries. This study incorporates the data of 5 developing countries namely Pakistan, China, India, South Africa and Malaysia over the period 1990 to 2012 and analysis has been made by employing the method of random Generalized Least Square (GLS) model. Hausman specification test and random effect model is used in this paper. The result reveals that Electricity consumption is highly significant in developing countries. The insignificant relationship find between inflation and electricity consumption during this time span (1990-2012) means inflation has no direct impact on economic growth of developing countries. So this study proves that employment rate and electricity consumption are the main variables that shows the positive impact and inflation has no direct impact on economic growth of developing countries. Developing Governments should adopt different policies namely sustainable electricity development and utilization of land and resources, for electricity production to meet its consumption appropriately which leads to boost employment rate in economy that ultimately improves the economic growth in developing countries. Developing Governments also take some measures namely monetary measures, fiscal measures, increase in production measures, proper commercial policies and encouragement to savings are important in order to control the inflation at its minimum level for the betterment of developing economies as a whole.