Energy intensity and firm growth

- We estimate the impact of improvement (decline) in energy intensity on firm growth using firm-level data from 21 manufacturing industries and six countries, namely, France, Germany Japan, Korea, the U.K., and the U.S., from 1991 to 2005.
- Our primary goal is to test the hypothesis that firm profits in the industry club with lower energy intensity grow faster than those in other industry clubs
- We introduced a relative measure of energy intensity compared to the corresponding industrial sector in the reference case (the U.S. industry) to control the heterogeneity in industrial dependence on energy.
- As a result, firm profits in the industry club with lower REI grow faster than the six-country average, whereas improvements in EI exhibit an insignificant effect.

Using micro-level data, we attempt to identify the causal relationship between improvement (decline) in energy intensity and firm growth in six countries, namely, France, Germany, Japan, Korea, the U.K., and the U.S., and 21 manufacturing industries during the period 1991 to 2005. We run a panel regression of firm growth using the inverse of a country- and industry-specific relative energy intensity (REI) measure with the corresponding industrial sector in the reference case (the U.S. industry) in addition to the inverse of the traditional energy intensity measure (EI) after controlling several firm, industry, and country variables.We find that EI and REI may have somewhat different impacts on firm growth in terms of profits and capital accumulation. When we control the heterogeneity in industrial dependence on energy, firm profits in the industry club with lower REI grow faster than the six-country average. Compared to the six country case, we find that the efficient use of energy inputs has made a smaller contribution to firm growth in Korea.