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The impact of energy prices on industrial investment location: Evidence from global firm level data

Aurélien Saussay and Misato Sato

Journal of Environmental Economics and Management, 2024, vol. 127, issue C

Abstract: This study examines the influence of relative energy prices on the geographical distribution of industrial investments across 41 countries. Employing a gravity model framework to analyse firms’ investment location decisions, we estimate the model using global bilateral investment flows derived from firm-level M&A data. Our findings reveal that a 10% increase in the energy price differential between two countries results in a 3.2% rise in cross-border acquisitions. This effect is most pronounced in energy-intensive industries and transactions targeting emerging economies. Furthermore, policy simulations suggest that the impact of unilateral carbon pricing on cross-border investments is modest.

Keywords: FDI; Mergers and acquisitions; Energy prices; Firm location; Competitiveness impacts; Carbon leakage (search for similar items in EconPapers)
JEL-codes: F21 F64 H23 Q52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:127:y:2024:i:c:s0095069624000664

DOI: 10.1016/j.jeem.2024.102992

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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