The effect of climate policy on productivity and cost pass-through in the German manufacturing sector

Beat Hintermann, Maja Zarkovic (), Corrado Di Maria and Ulrich Wagner
Additional contact information
Maja Zarkovic: University of Basel

Working papers from Faculty of Business and Economics - University of Basel

Abstract: We investigate productivity and cost pass-through of German manufacturing firms using administrative data from 2001 to 2014. Our framework allows for the estimation of quantity-based production functions for multi-product firms while controlling for unobserved productivity shocks and unobserved input quality. Using our parameter estimates, we can compute total factor productivity, markups and marginal costs. We find no effect of the EU ETS on firm productivity or profits for the whole sector, and a positive effect for some industries. Firms pass on shocks to materials costs completely, or even more than completely, whereas pass-through of energy costs is around 35-60%. Although pass-through of energy costs is incomplete, it nevertheless allowed firms to recover more than their total carbon costs due to generous free allocation of allowances. Our results add to the recent literature concerning the causal effects of climate policy on firms and are relevant for policy makers when defining the level of free allowance allocation to industry.

Keywords: Productivity; production function; markup; cost pass-through; EU ETS; climate policy (search for similar items in EconPapers)
JEL-codes: D24 H23 Q52 Q54 (search for similar items in EconPapers)
Date: 2020-09-30
New Economics Papers: this item is included in nep-eff, nep-ene, nep-env, nep-eur, nep-reg and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://edoc.unibas.ch/79571/1/2020_11_The%20effec ... cturing%20sector.pdf (application/pdf)

Related works:
Working Paper: The Effect of Climate Policy on Productivity and Cost Pass-Through in the German Manufacturing Sector (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2020/11

Access Statistics for this paper

More papers in Working papers from Faculty of Business and Economics - University of Basel Contact information at EDIRC.
Bibliographic data for series maintained by WWZ ().