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The interplay between green policy, electricity prices, financial constraints and jobs. Firm-level evidence

Author

Listed:
  • Gert Bijnens

    (Economics and Research Department, NBB and KULeuven)

  • John Hutchinson

    (European Central Bank)

  • Jozef Konings

    (KULeuven, University of Liverpool and Nazarbayev University)

  • Arthur Saint Guilhem

    (European Central Bank)

Abstract

Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy.

Suggested Citation

  • Gert Bijnens & John Hutchinson & Jozef Konings & Arthur Saint Guilhem, 2021. "The interplay between green policy, electricity prices, financial constraints and jobs. Firm-level evidence," Working Paper Research 399, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202104-399
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    File URL: https://www.nbb.be/fr/articles/interplay-between-green-policy-electricity-prices-financial-constraints-and-jobs-firm-level
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    Citations

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    Cited by:

    1. Çürük, Malik & Rozendaal, Rik, 2022. "Labor Share, Industry Concentration and Energy Prices : Evidence from Europe," Other publications TiSEM b97efaae-4632-41e1-9836-3, Tilburg University, School of Economics and Management.
    2. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.

    More about this item

    Keywords

    environmental regulation; labor demand; employment; manufacturing industry; monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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