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Productivity and misallocation of energy resources: Evidence from Korea’s manufacturing Sector

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  • Choi, Bongseok

Abstract

This paper analyzes the role of allocative efficiency of energy resources with respect to total factor productivity (TFP) in the Korean manufacturing sector. Using firm-level data for Korea, we extend the framework of Hsieh and Klenow (2009) to measure allocative inefficiency of energy markets as a function of energy price distortions. Our results indicate that between the years 2000 and 2014, intra-industry misallocation has increased. With respect to energy resources, this is truer in the low-oil-price periods than in other periods. An improvement in allocative efficiency could be attained by equalizing total factor revenue productivity across firms within an industry. In reallocating capital, labor, and energy resources, hypothetical TFP increases of 51.3 % and 71.7 % above actual levels in 2000 and 2014, respectively, could have been achieved. The evolution of firm productivity has been shaped by energy (electricity and fuel) market distortion and capital market distortion. Our evidence suggests that government (energy) price intervention is likely to have played an important role in productivity loss and in allocative inefficiency observed in energy markets.

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  • Choi, Bongseok, 2020. "Productivity and misallocation of energy resources: Evidence from Korea’s manufacturing Sector," Resource and Energy Economics, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:resene:v:61:y:2020:i:c:s0928765519302982
    DOI: 10.1016/j.reseneeco.2020.101184
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    Cited by:

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    3. Ur Rehman, Faheem & Islam, Md. Monirul, 2023. "Does energy infrastructure spur total factor productivity (TFP) in middle-income economies? An application of a novel energy infrastructure index," Applied Energy, Elsevier, vol. 336(C).
    4. Xiaolei Wang & Hui Wang & Shuang Liang & Shichun Xu, 2021. "The Influence of Energy Price Distortion on Region Energy Efficiency in China’s Energy-Intensive Industries from the Perspectives of Urban Heterogeneity," Sustainability, MDPI, vol. 14(1), pages 1-15, December.
    5. Li, Kun & Azacis, Helmuts & Luintel, Kul B, 2023. "Resource Misallocation in the Presence of R&D Spillovers," Cardiff Economics Working Papers E2023/24, Cardiff University, Cardiff Business School, Economics Section.
    6. Lei Nie & Zhenzhen Ren & Yanrui Wu & Qizhou Luo, 2024. "Urban industrial land misallocation and green total factor productivity: Evidence from China's Yellow River Basin regions," Australian Economic Papers, Wiley Blackwell, vol. 63(4), pages 646-666, December.
    7. He, Weijun & Li, Wanyu & Wang, Chun & Wang, Siyuan & Yang, Yuantao, 2024. "Does energy resource misallocation affect energy utilization efficiency? Evidence from Chinese provincial panel data," Energy, Elsevier, vol. 288(C).

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    More about this item

    Keywords

    Energy consumption; Misallocation; Allocative efficiency; Total factor productivity;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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