Ralf Martin

Multinationals and U.S. Productivity Leadership: Evidence from Great Britain

We study the productivity of US owned plants in the UK. Using a new dataset that identifies foreign and domestic MNEs, we find that UK MNEs are less productive than US affiliates, but as productive as non US foreign affiliates. We investigate the source of the US and MNE advantage. We find evidence confirming that the MNE advantage is driven by sharing superior firm level assets across plants and by cherry picking the better plants in a country. The additional superiority of US firms seems entirely driven by their particular ability to takeover the best British plants. Thirdly, the study features a novel approach to TFP calculation.

MODERN MANAGEMENT: GOOD FOR THE ENVIRONMENT OR JUST HOT AIR?*

We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of management practices is associated with a 17.4% reduction in energy intensity. This negative relationship is robust to a variety of controls for industry, location, technology and other factor inputs. Better managed firms are also significantly more productive. One interpretation of these results is that well managed firms are adopting modern lean manufacturing practices, which allows them to increase productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions.

Industry compensation under relocation risk: a firm-level analysis of the EU Emissions Trading Scheme

When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon intensive and trade exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation.

The Impact of a Carbon Tax on Manufacturing: Evidence from Microdata

We estimate the impact of a carbon tax on manufacturing plants using panel data from the UK production census. Our identification strategy builds on the comparison of outcomes between plants subject to the full tax and plants that paid only 20% of the tax. Exploiting exogenous variation in eligibility for the tax discount, we find that the carbon tax had a strong negative impact on energy intensity and electricity use. There is no evidence of an adverse impact on employment, revenue or plant exit.

The Impact of the European Union Emissions Trading Scheme on Regulated Firms: What Is the Evidence after Ten Years?

This article reviews the recent literature on ex post evaluation of the impacts of the European Union (EU) Emissions Trading Scheme (ETS) on regulated firms in the industrial and power sectors. We summarize the findings from original research papers concerning three broadly defined impacts: carbon dioxide emissions, economic performance and competitiveness, and innovation. We conclude by highlighting gaps in the current literature and suggesting priorities for future research on this landmark policy. ( JEL: Q52, Q54, Q58)

The Impact of the EU ETS on Regulated Firms: What is the Evidence after Nine Years?

This article reviews the recent literature on ex-post evaluation of the impacts of the European Union Emissions Trading Scheme (EU ETS)on regulated firms in the industrial and power sectors. We summarize the findings from original research papers concerning three broadly defined impacts: CO2 emissions, economic performance and competitiveness, and innovation. We conclude by highlighting gaps in the current literature and suggesting priorities for future research on this landmark policy.

Trading Behavior in the EU Emissions Trading Scheme

Based on interviews with 429 manufacturing firms in six European countries, this study explores the rationality of trading behavior in the European Union Emissions Trading Scheme (EU ETS). We find that banking from one year to the next is used by most firms. Equally, a large majority of installations that are part of larger firms, manage permits within their own installation despite having the option to pool within firms. About 30% of firms do not appreciate the market created by the EU ETS; i.e. they do not consider carbon allowances as a financial asset that could provide profit opportunities. Also, the majority of EU ETS participants in our sample does not trade on the EU allowance market. Finally, we show that some firms do not make their allowances available despite possessing an excess supply: on average firms start to sell only if they have an excess supply of around 5,000 allowances. However, the total number of excess allowances held by firms below the trading threshold is rather small, at less than 10% of all excess allowances.

Multinationals and U.S. Productivity Leadership

US plant level studies show US multinational enterprises (MNE) are more productive than other MNEs. This could reflect US productivity leadership or could be due to the ease in which US firms operate in their home surroundings. The evidence would therefore be more compelling if US firms were leaders outside the US. We study the productivity of plants owned by US firms located in the UK. Our study differs from many studies of foreign owned plants in three ways. Firstly, using a newly available dataset we can identify not only foreign but also domestic MNEs. We find that UK MNEs are less productive than US owned plants, but as productive as non US foreign owned plants. Secondly, having a panel dataset we distinguish between different hypotheses regarding the nature of the US and MNE advantage. We find strong evidence that the US advantage lies in the ability to takeover already productive plants. Whereas we find some evidence for a shared asset effect for MNEs in general we do not find any evidence that the US advantage is driven by superior shares assets. Thirdly, this paper features a novel approach to TFP calculation.