Energy efficiency and exporting: Evidence from firm-level data

- We examine the impact of exporting on firms' energy efficiency.
- We employ cost share equations, firm-level data from Indonesia, and an instrumental variables strategy.
- Exporting is found to reduce the use of fuels (relative to electricity).

While exporting firms and non-exporters have been compared across several dimensions, empirical comparisons on the basis of environmental performance are relatively few. Moreover, analyzing the environmental implications of firm-level exports is not trivial due to non-random selection into exporting. In this light, we examine the impact of exporting on firms' energy efficiency by resorting to an instrumental variables strategy based on a differencing approach (Pitt and Rosenzweig, 1990). Utilizing data from Indonesia, we find (i) exporting to reduce the use of fuels (relative to electricity) and (ii) concerns over endogeneity of exporting status to be relevant.