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Modern Management: Good for the Environment or Just Hot Air?

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Author Info

  • Nick Bloom
  • Christos Genakos
  • Ralf Martin
  • Raffaella Sadun

Abstract

We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of management practices is associated with a 17.4% reduction in energy intensity. This negative relationship is robust to a variety of controls for industry, location, technology and other factor inputs. Better managed firms are also significantly more productive. One interpretation of these results is that well managed firms are adopting modern lean manufacturing practices, which allows them to increase productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0891.

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Date of creation: Oct 2008
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Handle: RePEc:cep:cepdps:dp0891

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: management; energy efficiency; energy intensity and productivity;

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  1. Ralf Martin, 2005. "Productivity Dispersion, Competition and Productivity Measurement," CEP Discussion Papers, Centre for Economic Performance, LSE dp0692, Centre for Economic Performance, LSE.
  2. Eli Berman & Linda T.M. Bui, 1998. "Environmental Regulation and Productivity: Evidence from Oil Refineries," Papers, Boston University - Industry Studies Programme 0091, Boston University - Industry Studies Programme.
  3. Ronald J. Shadbegian & Wayne B. Gray, 2003. "Pollution Abatement Expenditures and Plant-Level Productivity: A Production Function Approach," NCEE Working Paper Series, National Center for Environmental Economics, U.S. Environmental Protection Agency 200305, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2003.
  4. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1719, Harvard - Institute of Economic Research.
  5. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(456), pages F416-42, June.
  6. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  7. Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(6), pages 1175-1219, December.
  8. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2012. "Americans Do IT Better: US Multinationals and the Productivity Miracle," American Economic Review, American Economic Association, American Economic Association, vol. 102(1), pages 167-201, February.
  9. Nick Bloom & Stephen Dorgan & John Dowdy & John Van Reenen & Tom Rippin, 2005. "Management practices across firms and nations," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4669, London School of Economics and Political Science, LSE Library.
  10. George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
  11. S Black & L Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," CEP Discussion Papers, Centre for Economic Performance, LSE dp0376, Centre for Economic Performance, LSE.
  12. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages 655-76, August.
  13. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," NBER Working Papers 12216, National Bureau of Economic Research, Inc.
  14. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  15. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  16. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers, Institute for Fiscal Studies W99/06, Institute for Fiscal Studies.
  17. Ann Bartel & Casey Ichniowski & Kathryn Shaw, 2007. "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(4), pages 1721-1758, November.
  18. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
  19. Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers, Massachusetts Institute of Technology (MIT), Sloan School of Management 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  20. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 291-313, June.
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  1. Human Capital Mitigates Many Pollution Exernalities
    by Matthew Kahn in Environmental and Urban Economics on 2014-07-23 16:32:00
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