Productivity and Energy Intensity in Latin America

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San Vicente Portes, Luis;
Guerrero, Santiago
Apr 2021
Within an industrial setting, what would ones conjecture be about the relation between Energy Intensity (EI) and productivity? Could higher Energy use be associated to more capital intensive processes, and thus higher output (per worker)? Or Ceteris paribus, are productivity indicators inversely associated with energy intensity? So that more productive firms or industries tend also to be more energy efficient. The nature of this question is multifold as there are historical, geographical, institutional, developmental, and policy variables that jointly affect industrial development as well as a nations energy supply. This study seeks to assess the relationship between these variables in the industrial sector of four Latin American countries. Under alternative measures of productivity, namely, average labor productivity and total factor productivity (TFP), we find a statistically negative relationship between productivity and Energy intensity.