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Growth, Firm Scale, and the Energy Intensity of Production

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  • Kathryn McDonald
  • Noémie Pinardon-Touati
  • Conor Walsh

Abstract

We uncover a new mechanism that links growth and a decline in the energy intensity of production, observed globally since 1990. Using microdata from India and a causal research design, we demonstrate that the expenditure share of energy declines steeply with firm scale, due both to physical scaling laws and technology investment. Given that average firm size increases with growth, this scale dependence implies that production endogenously becomes less energy-intensive along the growth path. We develop a model of this mechanism in general equilibrium, and quantify significant reductions in aggregate energy intensity as low-income countries like India grow. We conclude with a discussion of the future path of emissions in India.

Suggested Citation

  • Kathryn McDonald & Noémie Pinardon-Touati & Conor Walsh, 2026. "Growth, Firm Scale, and the Energy Intensity of Production," NBER Working Papers 35405, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35405
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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