The type of power capacity matters for economic development-Evidence from a global panel

We examine the relationship between different types of power investments and regional economic dynamics. We construct a novel panel dataset combining data on regional GDP and power capacity additions for different technologies between 1960 and 2015, which covers 65% of the global power capacity that has been installed in this period. We use an event study design to identify the effect of power capacity addition on GDP per capita, exploiting the fact that the exact amount of power capacity coming online each year is determined by random construction delays. We find evidence that GDP per capita increases by 0.2% in the 6 years around the coming online of 100 MW coal-fired power capacity. We find similar effects for hydropower capacity, but not for any other type of power capacity. The positive effects are regionally bounded and stronger for projects on new sites (green-field). The magnitude of this effect might not be comparable to the total external costs of building new coal-fired power capacity, yet our results help to explain why policymakers favor coal investments for spurring regional growth.(c) 2022 The Authors. Published by Elsevier B.V. CC_BY_4.0

Automated summary

This study examines the relationship between different types of power investments and regional economic dynamics. The research findings indicate that coal-fired and hydropower investments have a positive effect on GDP per capita, while other types of power investments do not show a positive effect. The positive effects vary across regions and are stronger for projects on new sites (green-field).