Energy Consumption and Economic Growth Nexus; European Industrial Experience 1850-1950
The European industrial experience enabled Europe to enjoy a twenty-two-fold increase in per capita GDP in the last two centuries; during which time their economic development surpassed Qing China, the Mughal Empire, and other world powers. Many economic historians have attempted to explain this phenomenon but have diverse opinions as to its cause. This thesis provides an empirical analysis on the role of energy consumption in economic growth during industrialization by Granger-causality tests on never before used in an econometric analysis. The final model includes variables of energy consumption total, GDP, and population in seven European countries: England, France, Germany, the Netherlands, Italy, Spain, and Sweden from 1850-1950. The significance and the direction of the causality offer new historical insights to the cause of modern industrial growth. The empirical analysis confirms bidirectional causation relationships between energy consumption and GDP, GDP and population, population and energy consumption.
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