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Energy Prices, Energy Intensity, and Firm Performance

Author

Listed:
  • Reyes Aterido
  • Mariana Iootty
  • Martin Melecky

Abstract

This paper estimates the effect of electricity prices on firm performance, focusing on firm productivity, sales, and employment. Using the World Bank Business Pulse Survey data for a sample of 24 emerging markets and developing economies during 2019–23, the paper estimates the average effect and the heterogeneous effects across industries of varying energy intensity and firms that implemented (or did not implement) energy efficiency measures (self-reported in the Business Pulse Survey). The findings show that increasing electricity prices by 1 percent reduces employment at firms in energy-intensive industries that did not adopt energy efficiency measures by about 1.5 percent, compared with similar firms in energy-non-intensive sectors. In parallel, energy-intensive firms may increase sales and productivity but this result is robust to all alternative specifications. Firms may increase sales while reducing employment after energy price hikes, by adopting energy-efficient technologies and by passing through costs to consumers in inelastic markets while reducing employment in energy-intensive sectors due to cost pressures. These results highlight the adoption of energy efficiency measures by firms as an important employment protection policy action to cope with future volatility in energy (electricity) prices.

Suggested Citation

  • Reyes Aterido & Mariana Iootty & Martin Melecky, 2025. "Energy Prices, Energy Intensity, and Firm Performance," Policy Research Working Paper Series 11069, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11069
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    References listed on IDEAS

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