The Heterogeneous Impacts of Firm Upgrading on Energy Intensity

Ziran Ding (), Mustapha Douch () and Povilas Lastauskas
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Ziran Ding: Bank of Lithuania
Mustapha Douch: University of Edinburgh

No 128, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: This paper examines the influence of export activity on a firm’s energy intensity, with a particular focus on the role of the upgrading process. We introduce a firm-level complexity index incorporating two dimensions: the complexity of the goods traded, and the complexity of the destination markets served. By employing a quasi-experimental shift-share research design (Borusyak et al., 2022), we show that growth in external demand incentivizes firms to undertake upgrading activities, resulting in lower energy intensity. Furthermore, financial constraints diminish the energy efficiency gains from upgrading, especially for small firms. In addition, we explore whether upgraded firms can leverage higher markups, and show that this strategy is effective only for large firms. These findings indicate the need for targeted support policies for small firms and highlight the critical importance of maintaining open trade in an increasingly fragmented world.

Keywords: Firm Upgrading; International Trade; Energy Intensity; Complexity; Structural Transformation; Economic Development (search for similar items in EconPapers)
JEL-codes: D22 F14 O33 Q56 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2024-12-17
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Working Paper: The Heterogeneous Impacts of Firm Upgrading on Energy Intensity (2024)
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