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The Heterogeneous Impacts of Firm Upgrading on Energy Intensity

Author

Listed:
  • Ziran Ding

    (Bank of Lithuania)

  • Mustapha Douch

    (University of Edinburgh)

  • Povilas Lastauskas

    (International Monetary Fund)

Abstract

This paper examines the influence of export activity on a firm’s energy intensity, with a particular focus on the role of the upgrading process. We introduce a firm-level complexity index incorporating two dimensions: the complexity of the goods traded, and the complexity of the destination markets served. By employing a quasi-experimental shift-share research design (Borusyak et al., 2022), we show that growth in external demand incentivizes firms to undertake upgrading activities, resulting in lower energy intensity. Furthermore, financial constraints diminish the energy efficiency gains from upgrading, especially for small firms. In addition, we explore whether upgraded firms can leverage higher markups, and show that this strategy is effective only for large firms. These findings indicate the need for targeted support policies for small firms and highlight the critical importance of maintaining open trade in an increasingly fragmented world.

Suggested Citation

  • Ziran Ding & Mustapha Douch & Povilas Lastauskas, 2024. "The Heterogeneous Impacts of Firm Upgrading on Energy Intensity," Bank of Lithuania Working Paper Series 128, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:128
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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

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