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When good managers face bad incentives: Management quality and fuel intensity in the presence of price distortions

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  • Schweiger, Helena
  • Stepanov, Alexander

Abstract

We use unique firm-level data on management practices and fuel expenditures in about 2000 manufacturing firms in central and eastern Europe, Central Asia, and Middle East and North Africa to examine how the quality of management practices relates to the fuel intensity of firms in the presence of fossil fuel subsidies. We use country- and country-sector-level measures of fossil fuel subsidies and distinguish between those that include externalities and those that do not. We find that better managed firms respond to the incentives and increase their fuel intensity if the difference between the supply cost and the consumer price of fuel is relatively large. This is particularly relevant for firms in high energy-intensive sectors. However, in the presence of environmental costs in the form of global warming and local pollution all types of firms tend to reduce their fuel intensity. Findings suggest that the combined effect of these two forces is not statistically distinguishable from zero overall. In high energy-intensive sectors, the polluting effect of fossil fuel subsidies prevails.

Suggested Citation

  • Schweiger, Helena & Stepanov, Alexander, 2022. "When good managers face bad incentives: Management quality and fuel intensity in the presence of price distortions," Energy Policy, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:enepol:v:164:y:2022:i:c:s0301421522000520
    DOI: 10.1016/j.enpol.2022.112827
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    1. Otrachshenko, Vladimir & Hartwell, Christopher A. & Popova, Olga, 2023. "Energy efficiency, market competition, and quality certification: Lessons from Central Asia," Energy Policy, Elsevier, vol. 177(C).

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    More about this item

    Keywords

    Energy intensity; Management practices; Fossil fuel subsidies; Firm behaviour;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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