How Dependent is Growth from Primary Energy

Except for specialized resource economics models, neoclassical economics pays little attention to the role of energy in growth. This paper examines the basic flaws behind the mainstream analytical arguments for this neglect, and provides an empirical reassessment of this role. We use an error correction model in order to estimate the long-run output elasticity of primary energy use in 50 countries between 1970 and 2011. By contrast with mainstream macroeconomics, our findings show that this elasticity lies between 0.6 and 0.7. This estimation is robust to the choice of various samples of countries and subperiods of time. In addition, we show that energy and growth are cointegrated and primary energy consumption univocally Granger causes GDP growth. This confirms the results on cointegration and causality between energy consumption and growth already obtained elsewhere (Stern (2010)). JEL codes: N70, O40, Q43.