was revealed. Also, they found a bidirectional relationship between electricity consumption and growth
in the short-term and long-term.
Similarly, this study collaborates well with findings
by Abosedra et al. (2009) using a direction of causality
between electricity consumption and industrial growth
for Lebanon, using monthly data covering the period
1995 to 2005. The outcome of the study substantiates
the absence of a long-term equilibrium relationship
between electricity consumption and industrial growth
and the existence of a unidirectional causality without feedback running from electricity consumption to
industrial growth.
Velasquez and Pichler (2010) also agree that a sufficient and an affordable supply of electricity has a
decisive significance for industrial productivity and
economic growth. Since a country’s economic growth
is a composite of economic activities of enterprises,
the less cost they must tolerate, the better a country’s
chance at harnessing their input towards greater levels
of gross domestic product and growth. Okpara (2011)
also supports this argument that industrial productivity
can contribute immensely towards economic growth
and poverty reduction. Rud (2012a, 2012b) investigate the effects of electricity provision on firms in
India. This finding is also supported by Rud (2012a)
where an increase in rural electrification in Indian
States starting in the mid-1960s led to an increase
in aggregate manufacturing output in the affected
states.
According to Fisher-Vanden, Mansur, and Wang
(2014), resource availability and input factor reliability are important for firm productivity and are
especially problematic in developing countries like
Nigeria. Olarinde and Omojolaibi (2014) examined
electricity consumption, institutions, and economic
growth in Nigeria for the period 1980–2011. They
tested for causality using the ARDL and WALD
test approach, and found a positive direct relationship between institutions, electricity consumption, and
economic growth.
Furthermore, the study results also correspond well
with Mawejje and Mawejje (2016), who confirmed a
long-run unidirectional causality running from electricity consumption to GDP At the macro-level as
well as a long-run causality running from electricity
consumption to industry; a unidirectional short-run
causality running from services sector to electricity
consumption; and neutrality in the agricultural sector
at a sectoral level.
These results suggest that current efforts to improve
the supply and affordability of the electricity are a
facilitating condition for industrial output. Moreover,
results suggest industrial-led electricity consumption
policies that can enhance industrial growth.
5.2 Does workers’ education and labour employed
matter?
Specifically, we find evidence that workers who
are graduates are more productive than those with
secondary school education; workers with secondary
school education are more productive than those with
primary school education; and workers with primary
school education are more productive than those with
no formal education. Furthermore, we find evidence
that workers’ education and the labour employed differentials correspond directly with industrial output
differentials. Several studies provide empirical evidence in support of this viewpoint. Syverson (2011)
find a positive relationship between the amount of education completed and labour employed. Earlier studies
(see Solow 1956) argued that changes in national
income are determined by changes in a country’s stock
of physical and human capital. More recently, the new
growth theories, such as those formulated by Romer
(1993) and Lucas (1988), also agree with this finding
by focusing on the importance of idea gaps and learning externalities in explaining why some countries are
richer than others. In another study, Vandenberghe
(2018) also agrees that educated workers relate to
increased industrial efficiency gains.
Cahuc and Zylberberg (2014) also argue that loweducated workers are too costly relative to their added
value. As a result, firms are willing to substitute loweducated workers by capital, to outsource part of their
activities to cheap-labour countries and (especially
in the case of excess labour supply) to hire more
educated workers as their productivity to wage cost
ratio is more favourable. Okumu and Buyinza (2018)
also confirmed that education has a positive and significant effect on output among firms in Uganda.
Mitana, Muwagga, Giacomazzi, Saint Kizito & Ariapa, (2019) also found that industries that employ
well-educated workers have increased productivity.
Bartelsman, Dobbelaere & Peters, (2015) also confirmed that the quantile return to educated labour
corresponds to the marginal change in productivity due
to a marginal change in the share of that type of workers being conditional on being in a firm belonging to
the quantile of the overall outcome distribution (i.e.,
the outcome being labour productivity in their case).
Levinsohn and Petrin (2003) showed a robust
upward-sloping profile between education and productivity; they also systematically highlighted that
educational credentials have a stronger impact on
productivity than on wage costs. Firms’ profitability (i.e., productivity–wage gap) is indeed found to
rise when lower educated workers are substituted by
higher educated ones (and vice versa). Estimates thus
support the existence of a ‘wage-compression effect’,
i.e., a situation in which the distribution of wage
costs is more compressed than workers’ education–
productivity profile (Vandenberghe & Lebedinski
2014). On the other hand, earnings differentials
between workers with different levels of education
do not reflect genuine industrial productivity differentials. This would explain why workers earn such
large returns from investing in education, yet, at the
same time, positive changes in a nation’s stock of
human capital have only a small impact on aggregate
productivity.
91
in the short-term and long-term.
Similarly, this study collaborates well with findings
by Abosedra et al. (2009) using a direction of causality
between electricity consumption and industrial growth
for Lebanon, using monthly data covering the period
1995 to 2005. The outcome of the study substantiates
the absence of a long-term equilibrium relationship
between electricity consumption and industrial growth
and the existence of a unidirectional causality without feedback running from electricity consumption to
industrial growth.
Velasquez and Pichler (2010) also agree that a sufficient and an affordable supply of electricity has a
decisive significance for industrial productivity and
economic growth. Since a country’s economic growth
is a composite of economic activities of enterprises,
the less cost they must tolerate, the better a country’s
chance at harnessing their input towards greater levels
of gross domestic product and growth. Okpara (2011)
also supports this argument that industrial productivity
can contribute immensely towards economic growth
and poverty reduction. Rud (2012a, 2012b) investigate the effects of electricity provision on firms in
India. This finding is also supported by Rud (2012a)
where an increase in rural electrification in Indian
States starting in the mid-1960s led to an increase
in aggregate manufacturing output in the affected
states.
According to Fisher-Vanden, Mansur, and Wang
(2014), resource availability and input factor reliability are important for firm productivity and are
especially problematic in developing countries like
Nigeria. Olarinde and Omojolaibi (2014) examined
electricity consumption, institutions, and economic
growth in Nigeria for the period 1980–2011. They
tested for causality using the ARDL and WALD
test approach, and found a positive direct relationship between institutions, electricity consumption, and
economic growth.
Furthermore, the study results also correspond well
with Mawejje and Mawejje (2016), who confirmed a
long-run unidirectional causality running from electricity consumption to GDP At the macro-level as
well as a long-run causality running from electricity
consumption to industry; a unidirectional short-run
causality running from services sector to electricity
consumption; and neutrality in the agricultural sector
at a sectoral level.
These results suggest that current efforts to improve
the supply and affordability of the electricity are a
facilitating condition for industrial output. Moreover,
results suggest industrial-led electricity consumption
policies that can enhance industrial growth.
5.2 Does workers’ education and labour employed
matter?
Specifically, we find evidence that workers who
are graduates are more productive than those with
secondary school education; workers with secondary
school education are more productive than those with
primary school education; and workers with primary
school education are more productive than those with
no formal education. Furthermore, we find evidence
that workers’ education and the labour employed differentials correspond directly with industrial output
differentials. Several studies provide empirical evidence in support of this viewpoint. Syverson (2011)
find a positive relationship between the amount of education completed and labour employed. Earlier studies
(see Solow 1956) argued that changes in national
income are determined by changes in a country’s stock
of physical and human capital. More recently, the new
growth theories, such as those formulated by Romer
(1993) and Lucas (1988), also agree with this finding
by focusing on the importance of idea gaps and learning externalities in explaining why some countries are
richer than others. In another study, Vandenberghe
(2018) also agrees that educated workers relate to
increased industrial efficiency gains.
Cahuc and Zylberberg (2014) also argue that loweducated workers are too costly relative to their added
value. As a result, firms are willing to substitute loweducated workers by capital, to outsource part of their
activities to cheap-labour countries and (especially
in the case of excess labour supply) to hire more
educated workers as their productivity to wage cost
ratio is more favourable. Okumu and Buyinza (2018)
also confirmed that education has a positive and significant effect on output among firms in Uganda.
Mitana, Muwagga, Giacomazzi, Saint Kizito & Ariapa, (2019) also found that industries that employ
well-educated workers have increased productivity.
Bartelsman, Dobbelaere & Peters, (2015) also confirmed that the quantile return to educated labour
corresponds to the marginal change in productivity due
to a marginal change in the share of that type of workers being conditional on being in a firm belonging to
the quantile of the overall outcome distribution (i.e.,
the outcome being labour productivity in their case).
Levinsohn and Petrin (2003) showed a robust
upward-sloping profile between education and productivity; they also systematically highlighted that
educational credentials have a stronger impact on
productivity than on wage costs. Firms’ profitability (i.e., productivity–wage gap) is indeed found to
rise when lower educated workers are substituted by
higher educated ones (and vice versa). Estimates thus
support the existence of a ‘wage-compression effect’,
i.e., a situation in which the distribution of wage
costs is more compressed than workers’ education–
productivity profile (Vandenberghe & Lebedinski
2014). On the other hand, earnings differentials
between workers with different levels of education
do not reflect genuine industrial productivity differentials. This would explain why workers earn such
large returns from investing in education, yet, at the
same time, positive changes in a nation’s stock of
human capital have only a small impact on aggregate
productivity.
91