"An important indicator of low capital per head available in developing countries is the consumption of energy". I could not decipher the concept.


2 Answers 2


In economics, capital refers to things that are used to produce other things.

So, capital includes tangible things like a delivery truck, an office building, or a factory. These are things which often require energy to run.

Hence, if a developing country has low capital per head, then it probably also has few delivery trucks, office buildings, and factories. And hence, it probably also has lower energy consumption.


Per capita availability of capital very strongly correlates with GDP per capita. GDP measures all economic activity and the capital is the input to this activity.

So your question is pretty much an extension of

How is energy consumption related to GDP?

Well, if not for differences in energy efficiency, GDP would be determined by energy consumption.

In a globalized world most businesses and countries have similar energy efficiencies, and if they do differ, poor countries have consistently lower energy efficiency. This preserves a neat correlation between GDP and energy consumption.

There is so much empirical evidence of it that it is pretty much a rule.

You can browse Google image search to see the evidence of it.

Many poor countries lack statistical apparatus to measure their GDP and use data like electricity consumption to estimate their GDP every year.


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