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Significant heterogeneity exists in energy markets and the business environment across the United States. States and regions have adopted different strategies to address both the challenges of supplying electricity and the negative externalities associated with its production (e.g., emissions, pollutants). Variation in strategies leads to divergent energy market choices that differentially impact important economic outcomes. Theory suggests that plants facing variation in electricity prices should respond by adjusting output and employment, but it may be difficult to estimate the impact of electricity prices because they are often negotiated. Recent research finds that larger or better-managed firms generally receive better prices than smaller or more poorly managed firms.

We will use Census Bureau manufacturing and energy consumption data, together with matched employee-employer data from the Longitudinal Employer-Household Dynamics program, to assess the effects of energy market variation in relation to the following questions. How do plants adjust output and employment in response to changes in the business environment, changes in energy prices, and environmental shocks? Which types of workers are impacted by these adjustments, and do firms shift employment and output from plants located in regions that receive negative environmental or price shocks to plants located in regions that did not receive the shock? What firm and plant characteristics correlate with plant outcomes such as energy intensity and pollution intensity? What adjustments do plants and firms make in response to shocks (e.g., changes in the business environment, changes in energy prices, environmental shocks)? What plant characteristics correlate with the energy intensity, pollution intensity, and productivity of its production processes?

Mark Curtis—Wake Forest University
Gale Boyd—Duke University
Jonathan Lee—East Carolina University
Ryan Decker—Federal Reserve Board of Governors

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