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Energy Costs and Productivity in Chilean Manufacturing Industry

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  • Roberto Álvarez
  • Álvaro García
  • Pablo García

Abstract

This paper evaluates the impact of recent cost shocks (i.e. energy price) on the productivity of Chilean manufacturing plants. Using information for the period 1992-2005, we quantify and analyze whether this effect has been heterogeneous across plants, according to their energy intensity and size. Results show a moderation in productivity since the year 2000 that is common for most of the manufacturing sectors. Moreover, the evidence suggests that this moderation has been larger in more energy-intensive industrial sectors. The econometrical estimations reveal a negative statistical relationship between productivity and energy costs (or the cost of energy): estimated elasticities suggest that a 10% increase in the energy price is associated to a reduction of productivity around 1% in the short-run and 2% in the long run. This effect tends to be larger for larger plants. For plants in the upper 90 percentile of size, the estimated reduction in productivity is larger and corresponds to 1.7% and 4.6%,respectively.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 482.

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Date of creation: Sep 2008
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Handle: RePEc:chb:bcchwp:482

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  1. Raphael Bergoeing Vela & Andrés Hernando & Andrea Repetto, 2010. "Market Reforms and Efficiency Gains in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 37(2 Year 20), pages 217-242, December.
  2. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  3. Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-77, November.
  4. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  5. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  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. Lokshin, Boris & Belderbos, René & Carree, Martin, 2007. "The Productivity Effects of Internal and External R&D: Evidence From a Dynamic Panel Data Model," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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