Economic Growth and the

Role of Energy Policy

TABLE OF CONTENTS
INTRODUCTION .......................................................................................................................... 1
RESEARCH METHODS ............................................................................................................... 1
DATA ANALYSIS AND RECOMMENDATIONS ..................................................................... 3
Austria ............................................................................................................................................. 3
Denmark .......................................................................................................................................... 5
Finland ............................................................................................................................................ 7
Sweden ............................................................................................................................................ 1
CONCLUSION ............................................................................................................................... 2
REFERENCES ............................................................................................................................... 3
APPENDIX15

1

INTRODUCTION
The economic growth rate of the country affects from many key factors and the key
production factors are energy, capital and labour. Energy is considered as the oxygen for the
economic growth rate of the country and it plays very important role in the production in the
economy, consumption level and in many other developmental factors of the country. In the
present report to analyse the importance of the economic growth rate in the economy of the
country, the data of EU 15 countries from the year 1960 to 2009. Through this the importance of
the energy in the economy growth rate of the countries Sweden, Denmark, Finland and Austria is
taken. These collected data is analysed with the help of statistical tool and on the basis of which
the relationship between the growth rate of GDP with the labour growth, capital growth and
Useful Work Growth will be measured.
This commentary depicts the relation between the primary factors of Labour & Capital along
side energy in influencing the economic growth or the GDP growth, to a further extent the role of
useful energy in economic production.
The mainstream economics have yet to include the contribution of natural resources or energy in
enhancing or facilitating economic growth. Although the report consists of a combined outlook
of the three factors (Capital, labour and useful energy) affecting economic growth, the useful
energy factor is solely analysed to determine the key factors that could strengthen or reduce the
linkage between useful energy and GDP growth over time. The primary factors identified were -
1) Substitution between various forms of energy and other resources within the prevailing
technology available for the period
2) Changes in the composition of energy input from the previous period
3) Technological change
4) Changes in the composition of economic output
It is useful to first understand how different affecting factors were incorporated into the three
primary factors stated. Empirical evidence of the factors is crucial to signifying a co-relation or
impact of useful energy over economic output. Due to the complexity of the data available the
primary factors providing a linkage between useful energy and economic output cannot be used
as evidence or appropriation in this instant. The neoclassical theory states that the technological
2

change being the main contributor towards continuing economic growth. As seen with capital
employed providing diminishing returns overtime the way of offsetting such return would be
raising state of technological knowledge providing higher return on capital. Again its is difficult
to provide technological change data effecting economic growth, so its considered to be
incorporated in capital figures for research and development and productivity measure for
labour, while a reducing gap between Exergy total primary energy and useful energy could
show technological enhances.
Ordinary linear regression and non-linear functions will be used as the method of graphing the
three factors with the GDP growth with further analysis explaining the general trend of these
factors influencing the GDP growth. The changes in the levels of capital, labour and useful
energy is calculated observing the effect of the change of each factor on the GDP growth for the
periods stated. The trend over a period of time is seen with other factors assumed to be at
constant. The graphs depict the points of policy restructuring during the periods of recessions or
other downturns in the economy.

RESEARCH METHODS

For the report the data of countries Sweden, Denmark, Finland and Austria is gathered.
Quantitative technique of research method is used to investigate the data and it is represented in
the different graphical forms. This data is gathered from the year 1960 to 2009 and with the help
of regression analysis the relationship between these variables is measured. Excel is used to
observe the relationships between the given variables and couple other selected ones, to depict
linear movements among the variables, whereas Statplus is applied for the linear and non-linear
functions. The dependant variable is consistent through out the paper being the GDP growth for
each country. While the independent variables are constant for the Labour and Useful work,
where the growth has been taken into consideration as one of the most appropriate factors
affecting GDP. For countries where the impact of capital was not seen as significant, the capital
growth was observed for the case of Sweden, Denmark and Finland. Capital is seen as an
influencing factor for the Austrian economy.

3

DATA ANALYSIS AND RECOMMENDATIONS
Austria

Analysis: The above graphs plotted establish the relationship between the dependent variable
GDP growth and independent variables capital, useful growth and labour. While plotting the
graph for GDP growth and labour growth the value of R Square is coming out to be 0.002. This
value shows that there is a very weak relationship between the two variables. Labour variable has
lowest effect on the GDP. This is probably happening because of the recession effect on the
various companies. Increase in the costs of labour can be the cause for it (Nienhaus, 2002). This
suggests that labour factor contributes at minimum level towards the Austrian economy.
While plotting the graph for GDP and Capital growth the value of R Square was recorded
as 0.326, which also reflects that there is weak relationship between the two variables. This
shows that capital has low amount of effect on the GPD of Austria. It means capital involvement
in the countrys economy is very low. The net capital stock at constant prices for the economy is
very low. Another reason could be the less encouragement to foreign investments and exports in
the country.
While plotting the graph for GDP and Useful work growth variables, the value of the R-
square recorded was 0.236. This value shows that there is a weak relationship between the two
variables. It can be observed that Useful wok growth has very low impact on the GDP of Austria.
-0.0800
-0.0600
-0.0400
-0.0200
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
1
9
6
1
1
9
6
3
1
9
6
5
1
9
6
7
1
9
6
9
1
9
7
1
1
9
7
3
1
9
7
5
1
9
7
7
1
9
7
9
1
9
8
1
1
9
8
3
1
9
8
5
1
9
8
7
1
9
8
9
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
G
r
o
w
t
h

Year
AUSTRIA
Growth GDP and Production Factors
GDP Growth Labor Growth Capital Growth Useful Work Growth
4

It means that minimum amount of work required to produce an energy transfer is not appropriate
or adequate.
Recommendation on policy implications: It has been derived that contribution of labour factor is
very low towards the Austria economy. So there is need to increase the labour output in the
nation. Government policies must focus on increasing the rate of labour output in the country.
The country should focus on increasing jobs and employment for the people who are
unemployed. Further it was observed that capital involvement in the GDP is very low. Capital
can be increased by encouraging investments and reserves policies in the country (Tom, 2004).
Further the measure that can be adopted is raising the exports. Again a weak relationship was
observed between the GDP and Useful work. It was derived that useful work factor has very low
impact on GDP of the nation. The country should make efforts to improve the useful work by
offering low prices subsidies regarding energy to the firms.

5

Denmark

Analysis: The above graph plotted, establishes the relationship between the dependent variables
and independent variables for the country Demark. While plotting the graph for GDP growth and
labour the value of R-square recorded was 0.282. This value reflects that there is a weak
relationship between the two variables. It suggests that contribution of labour towards the
Denmark economy and GDP is very low. Recession is the main cause for it, as people are not
being employed and are not getting jobs. Rising costs of labour is the main cause for such result.
While plotting the graph for capital growth and GDP the value of the R Square was
estimated at 0.200. This again shows that there is weak relationship between the two variables.
Factor of capital growth has low impact on GDP of the Denmark. This reflects that capital
involvement in the economy of the nation is very low. The reasons for that would be the less
encouragement to foreign investments and exports (Artis and Nixson, 2007).
While plotting the graph for GDP and Useful work the value of R square was spotted
as 0.144. This again shows that there is weak relationship between the two variables. Useful
work has low impact on the GDP of the Denmark. This suggests that minimum amount of work
required to produce an energy transfer is not improved. Oil crisis can be the reason for such
inadequate useful work
Recommendation on policy implications: In the above analysis it was observed that contribution
of labour factor is very low towards the GDP of the Denmark. Hence there is a need to increase
-0.1500
-0.1000
-0.0500
0.0000
0.0500
0.1000
0.1500
0.2000
1
9
6
1
1
9
6
3
1
9
6
5
1
9
6
7
1
9
6
9
1
9
7
1
1
9
7
3
1
9
7
5
1
9
7
7
1
9
7
9
1
9
8
1
1
9
8
3
1
9
8
5
1
9
8
7
1
9
8
9
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
G
r
o
w
t
h

Year
DENMARK
GDP and Production Factors
GDP Growth Labor Growth Capital Growth Useful Work Growth
6

the contribution from labours in the economy. Policies of the government must focus on
increasing the rate of labour output in Denmark. They can work on bringing new employment
policies and jobs for the individuals who are unemployed. Further it was observed that capital
engagement in the GDP is very low (Graziano, 2012). This can be improved by increasing the
amount of capital incentives and foreign investments. There is a need to raise the amount of
revenues and reserves. There is a need to increase the level of exports in the economy. Apart
from that weak relationship was observed between GDP and Useful work. The useful work of
the country can be improved by offering cheap subsidies to the energy sector companies such as
coal, electricity, oil, natural gas etc. Government of the Denmark must focus on all the three
factors considering them very significant for the GDP.

7

Finland

Analysis: Considering on the relationship between the GDP and Labour growth of the Finland,
there is huge impact of labour growth in the economy and this shows that the engagement of the
labour in GDP of the country is very high. The population of Finland was efficient in producing
the goods and services of the country. The productivity of the labours in the country is very high
and this also indicates that there contribution in per capita income of the country in the past years
were high and increase in the growth rate of the economy has major contribution from the labour
of the nation in compare to the capita and useful work of the country (Vega, Brown and
Chiasson, 2012).
On examining the relationship between the GDP and Capital Growth, there is huge
impact on the economy of the country as there is due to financial crisis of the year 1991 and
2007-2008 has affected the capital growth of the country. GDP of the country is comprised of
money value of goods and services which are produced within the country during the year and
increase or decrease in value of this services affect the economy of the country (Woolcock,
2012). The impact of the useful work growth on the economy of the Finland is 0.32 which
shows that increase in rate of the GDP of the country also affect from the useful work, though
the increase in rate of the energy in the country is lower in compare to increase in growth of the
economy in the Finland.
Recommendation on policy implications: The result of the R square of the GDP and labour is
higher in compare to the capital and useful work, therefore country can makes adjustments in
-0.1000
-0.0500
0.0000
0.0500
0.1000
0.1500
1
9
6
1
1
9
6
3
1
9
6
5
1
9
6
7
1
9
6
9
1
9
7
1
1
9
7
3
1
9
7
5
1
9
7
7
1
9
7
9
1
9
8
1
1
9
8
3
1
9
8
5
1
9
8
7
1
9
8
9
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
G
r
o
w
t
h

Year
FINLAND
Growth GDP and Production Factors
GDP Growth Labor Growth Capital Growth Useful Work Growth
8

labour policy and focus more on the useful work and capital of the country. Government have to
take initiatives in the area of the useful work and capital that is on the capital stock of the
country. The ability of the energy to contribute towards the growth in the economy of the
country is low (Rugina, 2001). For this a recommendation is made for the implication of the
policy that is to give more importance towards the useful energy and new investment plans are to
be implemented so that demand and supply of the energy is to be meet in appropriate way.

1

Sweden


Analysis: On analysing the relationship between the GDP and labour growth of the Sweden, the
contribution of the employees in the economy of the country was increasing in comparison to its
previous year results. R square is 0.263 and this shows that the contribution of the skilled labour
of the country in the growth rate of the economy is not at higher rate. The contribution of the
labour in the market of the country is increasing after the year 2004 and there was also high
increase in the productivity of the Sweden and huge focus is made towards the export sector.
Increase in the low wage rate of the labour of Sweden has increase in the recent years and this
also was one of the key reasons in lower contribution of the labour in the GDP of the country.
Measuring the relationship between the GDP and Capital growth of the country, the
economy of the nation was mainly suffered from the crisis of the year 1990. Growth rate of the
capital of the Sweden and lower contribution of the capital in the period of 1990s was due to the
restructuring of the tax system of the country for controlling the inflation has made negative
impact on the country. Due to this the bubble of financial crisis burst in the Sweden and affects
the entire economy of the country. From the value of the R square can be justified that why the
relationship between the GDP and Capital is only 0.157. Considering on the relationship between
the GDP and useful work, it was 0.247 and higher than the outcome of the GDP and capital.
There was good involvement of the energy resources in the contribution of the economy of the
-0.1000
-0.0500
0.0000
0.0500
0.1000
0.1500
1
9
6
1
1
9
6
3
1
9
6
5
1
9
6
7
1
9
6
9
1
9
7
1
1
9
7
3
1
9
7
5
1
9
7
7
1
9
7
9
1
9
8
1
1
9
8
3
1
9
8
5
1
9
8
7
1
9
8
9
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
G
r
o
w
t
h

Year
SWEDEN
Growth GDP and Production Factors
GDP Growth Labor Growth Capital Growth Useful Work Growth
2

country. It also represents that the all the energy services demanded by the final consumers were
meet by the country and from year 1960 to 2000, it was increasing at good rate but after the year
2000 there fluctuation in the growth rate of the useful work (Howell, 2009).
Recommendation on policy implications: For the implication of the policy in the Sweden, it is
essential that the government should focus on the labour or towards the productivity of the
nation. It is essential that more policies are to be implemented for the promotion of the exports
and increase in production of goods and services in the nation (Artis and Nixson, 2007). Better
policies of exports in the country also assist the nation to increase in capital of the country as it
also plays key role in increasing the growth rate of the economy. Focusing on implementation of
proper policies for the capital growth, labour growth and increase in usage of energy resources
will help to increase the growth rate of the economy.
Cost-efficiency should be seen as a primary hurdle for Sweden, observing that return on capital
is gradually decreasing the scope of furthering the impact on GDP would have to arise from the
efficiency in the Labour and Useful energy factors. Although a framework has been developed
for the 2030 action plan, the implementation through diverting investments to more efficient
sources is required with the support of the R&D department. The requirement of smarter grid
systems will contribute towards the efficient use of useful energy, the while also building on the
shared vision of decarburization of the Swedish economy through efficient channelization of
incoming investment will facilitate them meeting their action plan.
CONCLUSION
From the above study it has been concluded that labour capital and useful work plays
very significant role in the growth rate of the economy of the countries. The major impact, which
was encountered by the economies of Sweden, Denmark, Finland and Austria, was due to the
financial crisis. To boost the economy of the country, it is essential that policies are implemented
with consideration to the labor and energy utilization segments.
The 4 countries chosen have a similar energy outlook with Sweden, Denmark and Finland with a
similar capital growth with improvements for labour efficiency and useful energy efficiency
providing the scope of the for the furthest movement of influence on the GDP factor. Main factor
to improve efficiency in the useful energy sector though focuses on making the transportation
system more efficient.
3

REFERENCES
Journals
Graziano, R. P., 2012. Converging worlds of activation?: Activation policies and governance in
Europe and the role of the EU. International Journal of Sociology and Social Policy. 32(5/6).
pp.312 32.
Howell, E. K., 2009. Europeanization, globalization and domestication: financial services
regulation in the UK. International Journal of Law and Management. 51(5). pp.310 326.
Nienhaus, V., 2002. The European Union in the World Economy and Implications of EU
Policies for Globalisation Efforts of Developing Countries. Humanomics, 18(1). pp.46 67.
Rugina, N. A., 2001. Part I: The European Monetary and Economic Union, in its present form,
exposed to insurmountable difficulties. International Journal of Social Economics. 28(1/2),
pp.71 116.
Tom, E., 2004. Intellectual capital, social policy, economic development and the world
evolution. Journal of Intellectual Capital 5(4). pp.648 665.
Vega, A., Brown, D. and Chiasson, M., 2012. Open innovation and SMEs: Exploring policy and
the scope for improvements in university-based public programmes through a multidisciplinary
lens. International Journal of Entrepreneurial Behaviour & Research. 18(4). pp.457 476.
Books
Artis, M. and Nixson, F., 2007. Economics of the European Union. Oxford University Press.
Woolcock, S., 2012. European Union Economic Diplomacy: The Role of the EU in External
Economic Relations. Ashgate Publishing.






4

Appendix
Overview of energy scenarios
Energy in Sweden
[1]


Capita Prim. energy Production Import Electricity CO
2
-emission

Million TWh TWh TWh TWh Mt
2004 8.99 627 408 236 138.7 52.2
2007 9.15 586 391 221 139.4 46.2
2008 9.26 577 387 229 137.1 45.9
2009 9.30 528 353 207 131.5 41.7
2010 9.38 596 390 229 140.1 47.6
2012 9.45

132.6 44.9
Change 2004-10 4.3 % -4.9 % -4.5 % -3.1 % -1.0 % -8.8 %
Mtoe = 11.63 TWh . Prim. energy includes energy losses that are 2/3 for nuclear power
[2]


5


Energy in Finland
[1]


Capita Prim. energy Production Import Electricity CO
2
-emission

Million TWh TWh TWh TWh Mt
2004 5.23 443 185 247 87.7 68.9
2007 5.29 424 185 232 90.8 64.4
2008 5.31 410 193 230 86.9 56.6
2009 5.34 386 192 213 81.4 55.0
2010 5.36 423 201 210 88.4 62.9
2012 5.39

84.8 55.6
Change 2004-10 2.5 % -4.4 % 8.8 % -15.1 % 0.8 % -8.7 %
Mtoe = 11.63 TWh, Prim. energy includes energy losses that are 2/3 for nuclear power
[2]



6



Energy in Denmark
[10]


Capita Prim. energy Production Export Electricity CO
2
-emission

Million TWh TWh TWh TWh Mt
2004 5.40 233 361 117 35.8 50.9
2007 5.46 229 314 64 36.4 50.5
2008 5.49 221 309 54 35.5 48.4
2009 5.52 216 278 43 34.5 46.8
2010 5.55 224 271 42 35.1 47.0
2012 5.57

34.1 41.7
Change 2004-10 2.8 % -4.1 % -24.8 % -63.6 % 0.0 % -7.7 %
Mtoe = 11.63 TWh. Prim. energy includes energy losses.

7


Linear Regression for labor, capital and useful energy for Austria, Finland, Demark and
Sweden



y = 0.0384x - 0.0039
R = 0.0026
y = 0.2667x + 0.0245
R = 0.3265
y = 0.7178x + 0.0049
R = 0.2361
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 G
D
P

G
r
o
w
t
h

Labor Growth, Capital Growth and Usefulwork Growth
Austria
Labor Growth
Capital Growth
Useful Work Growth
y = 0.0384x - 0.0039
R = 0.0026
y = -0.5319x
3
- 9.0327x
2
+ 0.4721x - 0.005
-0.06
-0.04
-0.02
0
0.02
0.04
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800
G
D
P

G
r
o
w
t
h

Labour Growth
8




y = 0.4956x - 0.0175
R = 0.5271
y = 0.1982x + 0.0226
R = 0.1485
y = 0.7744x + 0.0068
R = 0.3211
-0.1
-0.05
0
0.05
0.1
0.15
-0.1000 -0.0500 0.0000 0.0500 0.1000 0.1500
G
D
P

G
r
o
w
t
h

Labor Growth, Capital Growth and Useful work Growth
Finland
Labor Growth
Capital Growth
Useful Work Growth
y = 0.4956x - 0.0175
R = 0.5271
y = -110.35x
3
+ 1.6683x
2
+ 1.0424x - 0.0284
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
-0.1000 -0.0800 -0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000 0.1200
G
D
P

G
r
o
w
t
h

Labor Growth
Finland
9



y = 0.1982x + 0.0226
R = 0.1485
y = 14.031x
3
+ 0.0066x
2
+ 0.1234x + 0.0237
-0.01
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
-0.1000 -0.0800 -0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000 0.1200
G
D
P

G
r
o
w
t
h

Capital Growth
Finland
y = 0.7744x + 0.0068
R = 0.3211
y = 110.55x
3
- 2.6293x
2
+ 0.2497x + 0.0189
-0.1
-0.05
0
0.05
0.1
0.15
-0.1000 -0.0800 -0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000 0.1200
G
D
P

G
r
o
w
t
h

Useful work Growth
Finland
10




y = 0.3709x - 0.0085
R = 0.2821
y = 0.1571x + 0.0164
R = 0.2001
y = 0.9022x + 0.0007
R = 0.1448
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000
G
D
P

G
r
o
w
t
h

Labor Growth, Capital Growth and Useful Work Growth
Denmark
Labor Growth
Capital Growth
Useful Work Growth
y = 0.3709x - 0.0085
R = 0.2821
y = 8.5536x
3
- 3.5793x
2
+ 0.5029x - 0.0078
-0.06
-0.04
-0.02
0
0.02
0.04
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000
G
D
P

G
r
o
w
t
h

Labour Growth
Denmark
11





y = 0.157x + 0.016
R = 0.200
y = 10.976x
3
- 1.2931x
2
+ 0.173x + 0.0169
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000
G
D
P

G
r
o
w
t
h

Capital Growth
Denmark
y = 0.9022x + 0.0007
R = 0.1448
y = -224.18x
3
+ 7.7408x
2
+ 1.4462x - 0.009
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800 0.1000
G
D
P

G
r
o
w
t
h

Useful Work Growth
Denmark
12



y = 0.3469x - 0.0064
R = 0.2633
y = 0.1913x + 0.0215
R = 0.1573
y = 0.7575x - 0.002
R = 0.247
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
0.12
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800
G
D
P

G
r
o
w
t
h

Labor Growth, Capital Growth and Useful Work Growth
Sweden
Labor Growth
Capital Growth
Useful Work Growth
y = 0.3469x - 0.0064
R = 0.2633
y = -43.678x
3
- 1.47x
2
+ 0.503x - 0.0067
-0.04
-0.03
-0.02
-0.01
0
0.01
0.02
0.03
0.04
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800
G
D
P

G
r
o
w
t
h

Labour Growth
Sweden
13




y = 0.1913x + 0.0215
R = 0.1573
y = 62.473x
3
- 0.5886x
2
+ 0.0449x + 0.0232
0
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800
G
D
P

G
r
o
w
t
h

Capital Growth
Sweden
y = 0.7575x - 0.002
R = 0.247
y = 8.5945x
3
+ 2.5943x
2
+ 0.6611x - 0.003
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
0.12
-0.0600 -0.0400 -0.0200 0.0000 0.0200 0.0400 0.0600 0.0800
G
D
P

G
r
o
w
t
h

Useful work Growth
Sweden
14