Complementary inputs and industrial development: can lower electricity prices improve energy efficiency?

Singer, Gregor (2024) Complementary inputs and industrial development: can lower electricity prices improve energy efficiency? Grantham Research Institute on Climate Change and the Environment Working Paper (407). Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, London, UK.

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Abstract

The transition from traditional labor intensive to modern capital intensive production is a key factor for industrial development. Using half a million observations from Indian manufacturing plants, I analyze the effects of a secular decrease in industrial electricity prices through the lens of a model with technology choices and complementarities between electricity and capital inputs. Using instrumental variables, I show how lower industrial electricity prices can increase both labor productivity and electricity productivity. Apart from positive effects on firm economic and environmental performance, cost-price pass through significantly benefitted consumers, and the productivity improvements limited increases in carbon emissions.

Item Type:	Monograph (Working Paper)
Official URL:	https://www.lse.ac.uk/granthaminstitute/publicatio...
Additional Information:	© 2024 The Author
Divisions:	Grantham Research Institute
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor T Technology > TK Electrical engineering. Electronics Nuclear engineering
JEL classification:	Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity D - Microeconomics > D2 - Production and Organizations > D20 - General O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
Date Deposited:	13 Mar 2024 14:39
Last Modified:	13 Mar 2024 14:39
URI:	http://eprints.lse.ac.uk/id/eprint/122365

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