Thursday, December 28, 2017

The Impact of Electricity on Economic Development: A Macroeconomic Perspective

I have a new working paper out, coauthored with Paul Burke and Stephan Bruns. The paper is one of those commissioned for the first year of the Energy for Economic Growth program, which is funded by the UK Department for International Development and directed by Catherine Wolfram.  The paper was actually completed in January 2017, but there has been a lot of delay in getting approval for publication. The project and the paper focuses on the role of electricity in economic development in Africa and South Asia, the two regions of the world where electricity is least accessible.

Access to and consumption of electricity varies dramatically around the world. Access is lowest in South Sudan at 4.5% of households, while consumption ranges from 39 kWh per capita – this includes all uses of electricity not just household use – in Haiti to 53,000 kWh per capita in Iceland – driven by aluminum smelting. Consumption is 13,000 kWh per capita in the US. Electricity use and access are strongly correlated with economic development, as theory would suggest:

Access and consumption have increased strongly in many poorer countries in recent years – will this have beneficial effects on development? The specific questions that DFID asked us to answer were:

• How serious do electricity supply problems have to be in order to constitute a serious brake on economic growth?

• To what degree has electrification prolonged or accelerated economic growth?

• What can be learned from the development experience of countries that have invested successfully in electrification?

In principle, it should be easier to find evidence for causal effects using more disaggregated micro level data as some variables can more easily be considered exogenous, and randomized trials and other field experiments are possible. On the other hand, growth is an economy-wide, dynamic, and long-term process with effects that cannot usually be captured in micro studies. Therefore, macroeconomic analysis is also needed. Our paper is complemented by a paper covering the microeconomic aspects of these questions.

Despite large empirical literatures – such as that on testing for Granger casuality between electricity use and economic growth – and suggestive case evidence, we found few methodologically strong studies that establish causal effects for electricity use, access, infrastructure, or reliability on an economy-wide basis. The best such study that we found is a paper by Calderon et al. in the Journal of Applied Econometrics. But this paper actually tests the effects of an aggregate of different types of infrastructure on growth.

We propose that future research focuses on identifying the causal effects of electricity reliability, infrastructure, and access on economic growth; testing the replicability of the literature; and deepening our theoretical understanding of how lack of availability of electricity can be a constraint to growth.

Annual Review 2017

I've been doing these annual reviews since 2011. They're mainly an exercise for me to see what I accomplished and what I didn't in the previous year. As I mentioned in last year's review, I am still struggling with work-life balance. It feels like that there is never enough time to get the work done I need to do and I am always making excuses for not getting things done. So, stopping and looking at what I did get done can help provide some perspective.

I was IDEC (Crawford's economics program) director till the end of the year. Ligang Song will take over as IDEC director in 2018. We continued to work on developing and seeking approval for new programs. We made some progress, but the final outcome will only be known in 2018 (hopefully). There was also quite a lot of work on the review of the Crawford School, the future of Asia-Pacific economics at ANU, economics at Crawford and ANU etc. The Arndt-Corden Department of Economics is officially a separate organizational unit from IDEC. Our plan is that going forward Arndt-Corden will represent the research, outreach, and PhD program components of all the economics activity at Crawford and IDEC will continue as the masters teaching program. This too is a work in progress. 

ANU environment and resource economists, Paul Burke, Frank Jotzo, Quentin Grafton, Jack Pezzey, and me

I made two international trips - one to Singapore and one to Europe and two short trips in Australia to Brisbane and Melbourne.  I went to the Singapore meeting for the IAEE international conference. My wife, Shuang, and son, Noah, came along too and we extended our stay to spend time in Singapore. We took the new direct flight from Canberra to Singapore, which is very convenient. From February there will also be Qatar Airways flights from Canberra, but apparently they will stop in Sydney before continuing to Singapore. That will just save time (maybe) on going between terminals in Sydney. To get to Europe I flew to Adelaide and then took Emirates via Dubai.

I was in Brisbane for the AARES conference. I have always found that the conference is much more dominated by agricultural economics than the journal but almost everything at the conference this time was agriculture related. Most of the environment papers dealt with agricultural impacts. I decided not to go in 2018, though the program is looking more balanced.

In December I traveled to Spain, Germany, and Israel. I gave a seminar at ICTA at the Autonomous University of Barcelona on the role of energy in modern economic growth. This was part of a series of seminars funded by the Maria de Maeztu program.

Speaking at ICTA, UAB, Barcelona

From there, I went on to Germany to work with Stephan Bruns on our ARC project and climate change paper. Alessio Moneta also visited from Pisa for a couple of days. Totally by coincidence, I arrived in Göttingen on the same day as Paul Burke who was touring Germany as part of his Energy Transition Hub activities:

Stephan Bruns, Krisztina Kis-Katos, Paul Burke, and me in Göttingen

We made quite good progress on both projects while I was there, but there is still much to do. We are just over the halfway point with the ARC DP16 project. One short paper is already published in Climatic Change, which discusses the accuracy of projections of future energy intensity. We also have another working paper on the restructuring of the US electricity generation industry and energy efficiency and have a paper under review on aircraft fuel economy.

We also completed and submitted our paper on the macroeconomic aspects of electricity and economic development for the DFID funded EEG project. Publication of the working papers and announcement of the next stages of the project have been much delayed, but there should be news on the latter soon. Together with our PhD student Akshay Shanker, I made a lot of progress on our contribution to a Handelsbanken Foundation funded project headed by Astrid Kander. Well, Akshay did most of the work... The paper  – about why energy intensity declines over time – will now be part of Akshay's PhD thesis.

I published fewer papers than last year, which isn't a surprise, as last year was a record year. There were five articles with a 2017 date:

Stern D. I., R. Gerlagh, and P. J. Burke (2017) Modeling the emissions-income relationship using long-run growth rates, Environment and Development Economics 22(6), 699-724. Working Paper Version | Blogpost

Stern D. I. (2017) How accurate are energy intensity projections? Climatic Change 143, 537-545. Working Paper Version | Blogpost

Zhang W., D. I. Stern, X. Liu, W. Cai, and C. Wang (2017) An analysis of the costs of energy saving and CO2 mitigation in rural households in China, Journal of Cleaner Production 165, 734-745. Working Paper Version | Blogpost
Stern D. I. and J. van Dijk (2017) Economic growth and global particulate pollution concentrations, Climatic Change 142, 391-406. Working Paper Version | Blogpost

Stern D. I. (2017) The environmental Kuznets curve after 25 years, Journal of Bioeconomics 19, 7-28. Working Paper Version | Blogpost

and there is one in press at the moment:

Bruns S. B. and D. I. Stern (in press) Overfitting bias and p-hacking in Granger-causality testing: Meta-evidence from the energy-growth literature, Empirical Economics. Working Paper Version | Blogpost

I also published a comment on a paper in Scientometrics:

Stern D. I. (2017) Comment on Bornmann (2017): Confidence intervals for journal impact factors, Scientometrics 113(3), 1811-1813. Blogpost

Follow the links to the blogposts to find out more about each paper.

I also published between 1 and 3 book chapters. It's often hard to work out when exactly a book chapter is published or not! This one is definitely published and it's open access for now. I only do book chapters where I can update an existing survey paper for the purpose. I posted 5 working papers, two of which have already been published and two are in the review process. In total, 6 papers are currently submitted, resubmitted, or in revision for resubmission.

Citations almost reached 14,000 on Google Scholar (h-index: 45) and will be well in excess of that for the end of 2017 when all this year's citations are finally included in Google's database.

I became an editor at PeerJ as part of their expansion into the environmental sciences. So far, I haven't actually handled a paper but I'm sure there will be some relevant submissions soon.

On the teaching side, I convened Masters Research Essay for the first time in the 1st Semester and taught Energy Economics for the last time for now in the second semester. My first PhD student here at Crawford, Alrick Campbell, received his PhD at the July graduation ceremony. He is currently a lecturer at the University of the West Indies in Jamaica.

I have been blogging even less this year than last. This will be the 19th post for 2017, whereas last year there were 35. Lack of time and increased use of Twitter are to blame. My Twitter followers now number more than 750, up from over 500 last year. The most popular blogpost this year was "Confidence Intervals for Journal Impact Factors".

Looking forward to 2018, it is easy to predict a couple of things that will happen that are already organized:

1. As mentioned above, I am ending my term as director of our economics program, IDEC, at the end of this calendar year. I am hoping to be able to focus a bit more on my research and get more balance in the coming year.

2. I will be the convener for Masters Research Essay and teach Environmental Economics in the first semester. I last taught environmental economics 10 years ago at RPI, so it will be quite a lot of work. I was getting a bit tired of teaching Energy Economics and if I did this course, Paul Burke could teach one of our compulsory first year masters microeconomics courses, so I decided to take it on. Both these courses are in the 1st semester and so I won't be teaching in the 2nd semester.

3. Early in the new year we will put out a working paper for our time series analysis of global climate change. We are currently revising the paper to resubmit to the Journal of Econometrics.

Nothing came of the job I applied for last year beyond the Skype interview, but I applied for another one this year...