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Energy endowments and the location of manufacturing firms

Kneller, Richard; Manderson, Edward

Authors

Richard Kneller

Edward Manderson



Abstract

This paper provides empirical evidence on whether individual firms choose to structure their production globally to exploit international differences in energy resources and prices. We use the US shale gas revolution as a quasi-natural experiment to analyse two extensive margins of adjustment by heterogeneous UK firms. First, we consider whether energy intensive UK firms have established new affiliates in the US in response to the shale gas shock. Second, we explore within-firm plant-level adjustments to consider whether the energy price gap increases the propensity for firms that have US operations to shut down their energy intensive UK plants. We find evidence in support of these two margins of adjustment. Taken together, these results suggest that multinational firms have relocated energy intensive production from the UK to the US due to the endowment-driven energy price gap.

Journal Article Type Article
Publication Date Feb 1, 2020
Journal Environmental Economics and Management
Print ISSN 0095-0696
Publisher Elsevier
Peer Reviewed Peer Reviewed
Article Number 102301
APA6 Citation Kneller, R., & Manderson, E. (2020). Energy endowments and the location of manufacturing firms. Journal of Environmental Economics and Management, https://doi.org/10.1016/j.jeem.2020.102301
DOI https://doi.org/10.1016/j.jeem.2020.102301
Keywords FDI; Energy endowments; Plant location; Heterogeneous firms JEL classification F21; D22; F23; Q33; O13
Publisher URL https://www.journals.elsevier.com/journal-of-environmental-economics-and-management

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