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Do energy prices affect employment? Decomposed international evidence

Erik Hille () and Patrick Möbius

Journal of Environmental Economics and Management, 2019, vol. 96, issue C, 1-21

Abstract: This paper analyzes the energy price-employment nexus and contributes to the literature by showing that it is important to decompose the regulatory effect into demand, cost, and factor-shift effects. This is done by means of a cross-country multi-sectoral dataset. The results show that both rising energy prices and shadow prices of energy have no significant effect on net employment when the manufacturing sectors only are analyzed. While finding significant variations across countries, the average employment effects become significantly positive once jobs in the economy as a whole are considered. This change is driven mainly by larger positive cost effects, which more than offset the negative demand effects and reductions in the positive factor-shift effects. Moreover, the paper reveals that the often implemented approach of using a simple regulation regressor, instead of decomposing the employment effect, can result in biased estimates.

Keywords: Energy prices; Shadow prices; Employment; Climate policy (search for similar items in EconPapers)
JEL-codes: E24 H23 J2 Q48 Q58 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jeem.2019.04.002

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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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