Complementary Inputs and Industrial Development: Can Lower Electricity Prices Improve Energy Efficiency?

Gregor Singer

No 10944, CESifo Working Paper Series from CESifo

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.

Keywords: industrial development; energy efficiency; electricity productivity; labor productivity; electricity prices; coal prices; incidence; climate policy (search for similar items in EconPapers)
JEL-codes: D22 D24 O14 Q41 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-eff, nep-ene and nep-env
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Working Paper: Complementary inputs and industrial development: can lower electricity prices improve energy efficiency? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10944

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