Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms
This paper provides novel evidence on the impact of changes in energy prices on manufacturing performance in two large developing economies -- Indonesia and Mexico. It finds that unlike increases in electricity prices, which harm plants' perfo...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/670351570710975641/Too-Much-Energy-The-Perverse-Effect-of-Low-Fuel-Prices-on-Firms http://hdl.handle.net/10986/32584 |
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okr-10986-325842022-09-20T00:14:45Z Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms Cali, Massimiliano Cantore, Nicola Iacovone, Leonardo Pereira-Lopez, Mariana Presidente, Giorgio FUEL SUBSIDY FUEL PRICE ENERGY PRICE PRODUCTIVITY TECHNOLOGY ADOPTION ELECTRICITY FIRM PERFORMANCE This paper provides novel evidence on the impact of changes in energy prices on manufacturing performance in two large developing economies -- Indonesia and Mexico. It finds that unlike increases in electricity prices, which harm plants' performance, fuel price hikes result in higher productivity and profits of manufacturing plants. The results of instrumental variable estimation imply that a 10 percent increase in fuel prices would lead to a 3.3 percent increase in total factor productivity for Indonesian and 1.2 percent for Mexican plants. The evidence suggests that effects are driven by the incentives that fuel price increases provide to plants towards replacing inefficient fuel-powered with more productive electricity-powered capital equipment. These results help to re-evaluate the policy trade-off between reducing carbon emissions and improving economic performance, particularly in countries with large fuel subsidies such as Indonesia and Mexico. 2019-10-18T15:32:15Z 2019-10-18T15:32:15Z 2019-10 Working Paper http://documents.worldbank.org/curated/en/670351570710975641/Too-Much-Energy-The-Perverse-Effect-of-Low-Fuel-Prices-on-Firms http://hdl.handle.net/10986/32584 English Policy Research Working Paper;No. 9039 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper East Asia and Pacific Latin America & Caribbean Indonesia Mexico |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
FUEL SUBSIDY FUEL PRICE ENERGY PRICE PRODUCTIVITY TECHNOLOGY ADOPTION ELECTRICITY FIRM PERFORMANCE |
| spellingShingle |
FUEL SUBSIDY FUEL PRICE ENERGY PRICE PRODUCTIVITY TECHNOLOGY ADOPTION ELECTRICITY FIRM PERFORMANCE Cali, Massimiliano Cantore, Nicola Iacovone, Leonardo Pereira-Lopez, Mariana Presidente, Giorgio Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| geographic_facet |
East Asia and Pacific Latin America & Caribbean Indonesia Mexico |
| relation |
Policy Research Working Paper;No. 9039 |
| description |
This paper provides novel evidence on
the impact of changes in energy prices on manufacturing
performance in two large developing economies -- Indonesia
and Mexico. It finds that unlike increases in electricity
prices, which harm plants' performance, fuel price
hikes result in higher productivity and profits of
manufacturing plants. The results of instrumental variable
estimation imply that a 10 percent increase in fuel prices
would lead to a 3.3 percent increase in total factor
productivity for Indonesian and 1.2 percent for Mexican
plants. The evidence suggests that effects are driven by the
incentives that fuel price increases provide to plants
towards replacing inefficient fuel-powered with more
productive electricity-powered capital equipment. These
results help to re-evaluate the policy trade-off between
reducing carbon emissions and improving economic
performance, particularly in countries with large fuel
subsidies such as Indonesia and Mexico. |
| format |
Working Paper |
| author |
Cali, Massimiliano Cantore, Nicola Iacovone, Leonardo Pereira-Lopez, Mariana Presidente, Giorgio |
| author_facet |
Cali, Massimiliano Cantore, Nicola Iacovone, Leonardo Pereira-Lopez, Mariana Presidente, Giorgio |
| author_sort |
Cali, Massimiliano |
| title |
Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| title_short |
Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| title_full |
Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| title_fullStr |
Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| title_full_unstemmed |
Too Much Energy : The Perverse Effect of Low Fuel Prices on Firms |
| title_sort |
too much energy : the perverse effect of low fuel prices on firms |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/670351570710975641/Too-Much-Energy-The-Perverse-Effect-of-Low-Fuel-Prices-on-Firms http://hdl.handle.net/10986/32584 |
| _version_ |
1764476852055834624 |