Complementarity between Labor and Energy : A Firm-Level Analysis
This paper extends the literature on the potential negative employment effect of environmental policy by bringing to the fore a key factor that directly regulates its magnitude: the elasticity of substitution between labor and energy. Using firm-level data from the French manufacturing sector and addressing endogeneity concerns, we provide empirical estimates that point to strong complementarity between labor and energy. We then investigate the empirical relevance of the elasticity of substitution in studying firms’ response to changing energy prices. Our findings suggest that the negative employment effects of rising energy prices are largely driven by firms with limited substitution capacity. Further, high energy prices have negative impacts on the R&D activities among firms with low input substitutability, which has implications for their long-term growth prospects
Year of publication: |
2022
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Authors: | Bretschger, Lucas ; Jo, Ara |
Publisher: |
[S.l.] : SSRN |
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