The Interplay between Green Policy, Electricity Prices, Financial Constraints and Jobs: Firm-Level Evidence

52 Pages Posted: 16 Apr 2021

See all articles by Gert Bijnens

Gert Bijnens

KU Leuven

John Hutchinson

European Central Bank (ECB)

Jozef Konings

University of Liverpool

Arthur Saint Guilhem

European Central Bank (ECB)

Date Written: April 1, 2021

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.

JEL Classification: E52, H23, J23, Q48

Suggested Citation

Bijnens, Gert and Hutchinson, John and Konings, Jozef and Guilhem, Arthur Saint, The Interplay between Green Policy, Electricity Prices, Financial Constraints and Jobs: Firm-Level Evidence (April 1, 2021). ECB Working Paper No. 2021/2537, Available at SSRN: https://ssrn.com/abstract=3825658

Gert Bijnens (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

John Hutchinson

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Jozef Konings

University of Liverpool ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Arthur Saint Guilhem

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
32
Abstract Views
97
PlumX Metrics