IMF Working Papers

The Heterogeneous Impacts of Firm Upgrading on Energy Intensity

By Povilas Lastauskas, Ziran Ding, Mustapha Douch

December 6, 2024

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Format: Chicago

Povilas Lastauskas, Ziran Ding, and Mustapha Douch. "The Heterogeneous Impacts of Firm Upgrading on Energy Intensity", IMF Working Papers 2024, 248 (2024), accessed January 14, 2025, https://doi.org/10.5089/9798400293580.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines how export activity impacts a firm's energy intensity, emphasizing the upgrading process. We introduce a firm-level complexity index incorporating two dimensions: the complexity of the traded goods and market destinations. We show that growth in external demand incentivizes firms to undertake upgrading activities, resulting in lower energy intensity. However, financial constraints diminish the energy efficiency gains from upgrading, especially for small firms. Additionally, upgraded firms can leverage higher markups, but this is effective only for larger firms. The findings suggest targeted support for small firms and underscore the necessity of open trade in a fragmented global landscape.

Subject: Demand elasticity, Economic theory, Energy conservation, Environment, Exports, Global value chains, Globalization, Imports, International trade

Keywords: Complexity index, Demand elasticity, Energy conservation, Energy intensity, Export activity, Exports, Global, Global value chains, Imports, Upgrading activity, Upgrading process

Publication Details

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