DEVELOPMENT AND ENERGY CONSUMPTION
By ASHOK V. DESAI
Energy, as an essential input into production processes, fits well into an input-
output or a production function type of framework. A number of attempts have
been made to estimate the energy-output relationship.' The rationale of this may
be sought in the fact that most capital-using activities require energy; energy
input can be regarded as a flow surrogate for capital stock.2
If it is so regarded, a rise in energy per worker should be subject to diminishing
returns, and the output-elasticity of energy consumption should exceed one.
There is some evidence to this effect. In his study of the world energy economy,
Darmstadter' obtained output-elasticities of commercial energy consumption over
unity for less developed countries, with an average of 1.7; his elasticities for devel-
oped countries were, however, generally less than one. More recently, Strout,4
who included firewood and fitted quadratic regressions of energy consumption on
GDP and population, obtained an output-elasticity of 1.3 for developed and
developing countries together.
If these cross-country comparisons had relevance to developments over time,
the growth of developing countries would require rising energy-intensity; global
projections of energy consumption in fact envisage such an increase.5 The prospect
of a fossil energy shortage would also be seen to have more serious implications for
developing countries. In this paper we shall take a closer look at variations in
national and sectoral energy-intensities, and show that when all forms of energy
are brought into the reckoning, there is no evidence that development entails
Among the factors that can affect inter-country comparisons of energy inten-
sity, three are important: the valuation of GDPs, inclusion or exclusion of various
forms of energy, and their relative weights in aggregation.
See for instance, Herendeen, R. A. (1973) 'An energy input-output model for the United
States (1963). user's guide'. Center for Advanced Computation Technical Report No. 67,
University of Illinois, Urbana, Illinois; Fuss, M. A. (1977), 'The demand for energy in Canadian
manufacturing: an example of the estimation of production structures with many inputs',
Journal of Econometrics, 5, pp. 89-116; Atkinson, S. E. and Halvorsen, R. (1976), 'Interfuel
substitution in steam electric power generation', Journal of Political Economy, 84, pp. 959-978.
2For a theoretical exercise on these lines see Chen, J. (1976), 'The short-run effects of an
Increase of the energy price on macroeconomic activity: a comparative static approach",
Zeitschrift fur Nationalökonomie, 36, pp. 333-345.
Darmstadter, J. (1971), Energy in the world economy. A statistical review of trends in out-
put, trade and consumption since 1925, Johns Hopkins Press, Baltimore; Time series estimates of
elasticity, however, show considerable variation among countries as well as periods and do not
show a general distinction between developed and developing countries; see Smil, V. and Kuz,
T. (1976), 'European energy elasticities', Energy Policy, IV (2), pp. 171-175.
Strout, A. (1976), 'Energy and the less developed countries: needs for additional research'
in Ridker. R. G. (ed.), Changing resource problems of the Fourth World, Washington.
Cf. Workshop on Alternative Energy Strategies (1977), Energy: global prospects 1985-2000,
McGraw-Hill, New York.