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Measuring the Economic Benefits of Industrial Natural Gas Use in South Korea

Hyo-Jin Kim (), Su-Mi Han () and Seung-Hoon Yoo ()
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Hyo-Jin Kim: Department of Energy Policy, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea
Su-Mi Han: Department of Integrated Energy & Environment, Graduate School of Energy & Environment, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea

Sustainability, 2018, vol. 10, issue 7, 1-10

Abstract: Natural gas (NG) is an important input used in the industrial production of South Korea. Therefore, the government requires quantitative information to be provided about the economic benefits of industrial NG (ING) use to decide whether to invest in expanding the supply of ING or not. This manuscript tries to measure the economic benefits of NG use in the manufacturing industry by using a specific case in South Korea. For this purpose, a trans-log production function is estimated using the data collected from a national survey of 1100 firms in South Korea. Of them, 299 firms used ING. For a representative manufacturing firm, the point estimated for the economic benefits of ING use is obtained as KRW 2409 (USD 2.07) per m 3 , which is statistically meaningful. The average price of ING, which is defined as the total expenditure on ING purchased in 2016 and divided by the total amount of ING purchased in 2016, was KRW 667 (USD 0.57) per m 3 . Therefore, the economic benefits of ING use are 3.61 times as great as the average price of ING. This implies that ING produces more value than its price in South Korea.

Keywords: industrial natural gas; input; value of marginal product; economic benefits; trans-log production function (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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