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Complementarity between labor and energy: A firm-?level analysis

Author

Listed:
  • Lucas Bretschger

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Ara Jo

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

Abstract

This paper adds a fresh angle to the on-going debate 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, we provide rigorous micro estimates of this parameter that point to strong complementarity between labor and energy. We then provide clear evidence for the empirical, as well as theoretical, relevance of the elasticity of substitution in understanding the effect of environmental policies on employment.

Suggested Citation

  • Lucas Bretschger & Ara Jo, 2021. "Complementarity between labor and energy: A firm-?level analysis," CER-ETH Economics working paper series 21/364, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:21-364
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    File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-21-364.pdf
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    References listed on IDEAS

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    Cited by:

    1. Çürük, Malik & Rozendaal, Rik, 2022. "Labor Share, Industry Concentration and Energy Prices : Evidence from Europe," Discussion Paper 2022-023, Tilburg University, Center for Economic Research.

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    More about this item

    Keywords

    market-based regulation; employment; elasticity of substitution;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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