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Good for the environment, good for business: foreign acquisitions and energy intensity

Brucal, Arlan, Javorcik, Beata and Love, Inessa (2019) Good for the environment, good for business: foreign acquisitions and energy intensity. CEPR discussion paper series (DP13810). Centre for Economic Policy Research (CEPR), London, UK.

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The link between foreign ownership and environmental performance remains a controversial issue. This paper contributes to our understanding of this subject by analyzing the impact of foreign acquisitions on plant-level energy intensity. The analysis applies a difference-in-differences approach combined with propensity score matching to the data from the Indonesian Manufacturing Census for the period 1983-2001 (or 1983-2008 in robustness checks). It covers 210 acquisition cases where an acquired plant is observed two years before and at least three years after an ownership change and for which a carefully selected control plant exists. The results suggest that while foreign ownership increases the overall energy usage due to expansion of output, it decreases the plant's energy intensity. Specifically, acquired plants reduce energy intensity by about 30% two years after acquisition, relative to the control plants. In contrast, foreign divestments tend to increase energy intensity. At the aggregate level, entry of foreign-owned plants is associated with industry-wide reduction in energy intensity.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2019 The Authors
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
G Geography. Anthropology. Recreation > GE Environmental Sciences
JEL classification: F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting; Environmental Equity
Date Deposited: 28 Jun 2019 13:51
Last Modified: 05 Feb 2021 19:06

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