Environmental variables and power firms' productivity: micro panel estimation with time-Invariant variables

Simona Bigerna, Maria Chiara D'Errico and Paolo Polinori

MPRA Paper from University Library of Munich, Germany

Abstract: Internal and external institutions play a crucial role in the firms’ decision-making process and their productivity. Along with internal institutional features, such as the corporate ownership structure, external institutions, such as the stringency of market and environmental regulations, shape the framework in which firms operate. This research explores the role of these determinants and their interactions in affecting the productivity changes of the power generating firms in 15 European countries between 2010 and 2016. In a first step, using the firm-level ORBIS dataset, we first the productivity changes over time of power generating companies (NACE Code Rev.2.3511) using the global Malmquist index. Then, in a second step, dynamic panel linear model is applied to investigate how the internal and external institutional variables affect the dynamic of the global Malmquist index. In a preliminary analysis a wide range of tests are performed to detect the presence of outliers, the returns to scale, the correlation among inputs, out- puts and the productivity indexes, the independence between the distribution of the productivity indexes and the second-stage institutional variables. The institutional variables are almost time-invariant, the procedure proposed by Kripfganz and Schwarz (2019) is applied to consistently identify the effects of time invariant variables. This new method provides valuable robustness against wrong assumptions on the exogeneity on the instruments. To capture the interplay among external 54 and internal institutional variables, interaction variables are used. Results highlight the need to fine-tune the environmental regulation with the firm-specific internal features, to avoid hindering firm-level productivity in the power generation sector.

Keywords: Environmental and Market regulation; Time-Invariant Variables; Global Malmquist Index; Electricity Sector (search for similar items in EconPapers)
JEL-codes: C2 L5 L9 O4 Q4 (search for similar items in EconPapers)
Date: 2022-08-11
New Economics Papers: this item is included in nep-eff and nep-ene
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