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Energy Endowments and the Location of Manufacturing Firms

Edward J. Manderson and Richard Kneller ()

Economics Discussion Paper Series from Economics, The University of Manchester

Abstract: This paper provides empirical evidence on whether individual firms choose to structure their production globally to exploit international differences in energy resources and prices. We use the US shale gas revolution as a quasi-natural experiment to analyse two extensive margins of adjustment by heterogeneous UK firms. First, we consider whether energy intensive UK firms have established new affiliates in the US in response to the shale gas shock. Second, we explore within-firm plant-level adjustments to consider whether the energy price gap increases the propensity for firms that have US operations to shut down their energy intensive UK plants. We find evidence in support of these two margins of adjustment. Taken together, these results suggest that multinational firms have relocated energy intensive production from the UK to the US due to the endowment-driven energy price gap.

JEL-codes: D22 F21 F23 O13 Q33 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene
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