Energy Costs and Productivity in Chilean Manufacturing Industry

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.